The Bitcoin mining stronghold China is collapsing. There has been a great exodus of mining capacities that has made one region a beneficiary of the Chinese sanctions: the United States. What are the chances that the USA will become the new Bitcoin mining superpower and why the traditional gas and oil industry can also benefit from this development.
The fact that China is taking action against private crypto currencies and perceiving them as a serious threat is cold coffee. However, not everyone would have expected the tough crackdown on the Bitcoin mining industry since May of this year. Not only has this put the Bitcoin course under pressure and briefly brought the mining difficulty to a halt, an entire industry is now fleeing the country. One nation in particular benefits from the miners’ exodus: the United States.
Goodbye China: lucky in bad luck?
What comes across as negative news for the market can prove to be a godsend in the long term. As explained in the comment from last week, the exodus of Chinese miners offers the opportunity to significantly reduce mining centralization in China. After all, depending on the sources or information, between 50 and 70 percent of mining capacities are located in China. A great dependency for the actually decentralized Bitcoin network.
The re-decentralization of mining resources offers the opportunity to make Bitcoin even more stable against political influences and to reduce reservations on the part of western investors. China-critical investors in particular should be happy about the redistribution. However, in order for mining to be decentralized, the new plants would have to be spread across different regions. From a politically neutral perspective, it makes no sense if China’s capacities are transferred one-to-one to a single other country.
That the mining capacities are now distributed fairly across different regions of the world is a dream that will certainly not come true. Even if China is relinquishing its leadership position, there are likely to be only a few countries in which the majority of the Bitcoin hashrate will reassemble. The all-important factor of energy costs reduces the options of the future leading mining sites to a manageable number of regions.
One of the beneficiaries is Kazakhstan, where more and more miners have settled. However, this is likely to be primarily a short-term trend. After all, the country offers little political stability, which is particularly important for investors. Rather, the Central Asian country should benefit from its geographical proximity to China as well as extremely low electricity prices and low (environmental) requirements. In the long term, however, the biggest winner is likely to be the American continent.
Not a day without a message
There is no shortage of positive news that underpin the American-Canadian miner expansion. Here are the most important messages, only from July 2021:
- Pennsylvania-based Stronghold Digital Mining plans to go public for $ 100 million
- Canada’s Hive has acquired 3,000 new Bitcoin miners; Increase in the operational hashrate by up to 46 percent
- A new Bitcoin mining center is being built in Ohio that will be fed with 1,000 MW of nuclear energy
- Genesis Digital Assets has raised $ 125 million to continue its mining expansion in Scandinavia and the United States
- Canadian mining company 8 Hut Mining has acquired Bitcoin Miner for $ 44 million
- The Australian crypto company Mawson Infrastructure has bought hundreds of mining devices from the Chinese mining company Canaan in order to set them up in the USA (Georgia)
The billions that are now being invested in the new locations show not only a high level of investor confidence in the future of crypto mining, but also that a large part of the hashrate will very likely be generated in the USA in the future. Marathon Digital’s Fred Thiel estimates that by the end of next year, around 40 percent of the global hashrate will come from the US. This would roughly double the current American haste performance.
Canada and USA: old hands in new business
When it comes to mining physical precious metals, Canada is No. 1 in the world. 75 percent of all mining companies are headquartered there. It is therefore obvious that more and more crypto mining companies are setting up there, even if they are operationally elsewhere. Its big neighbor, the USA, also lives up to its reputation as a raw material nation. For example, Americans benefit from very low energy prices within their own national borders. Last but not least, the fracking industry ensured that the USA was able to reduce its dependence on fossil fuels.
In Texas in particular, the crypto mining industry is welcomed with open arms. Nowhere else in the US is electricity cheaper than there. Especially since politics, contrary to China, wants the mining companies to settle there as a new industry. In addition to Texas, the state of Wyoming, which has the most progressive crypto regulation in the USA, is also a hot candidate.
When physical raw materials become digital gold
It doesn’t always have to be new companies or crypto start-ups that mine Bitcoin and Co. Traditional oil and gas extraction companies, especially fracking, can also generate additional income from crypto mining. For example, some companies are trying to use excess energy generated during oil and gas production for Bitcoin mining. The company Great American Mining (GAM) has specialized in this and has set up containers with Bitcoin mining rigs next to oil fields, which are supplied with the excess gas.
The well-known Winklevoss brothers – operators of the Gemini crypto exchange – have also invested in an energy producer that uses the excess gas to mine cryptocurrencies. This is the Texas company Crusoe Energy Systems. The Canadian oil company Black Pearl Resources is also intended to increase its profitability in this way. Upstream Data, on the other hand, has even specialized in mining rigs for energy producers.
Bitcoin mining: more participation for investors
The miner’s exodus to America could also bring some advantages for investors. In addition to greater political stability, they benefit from the financial market-affine jurisdictions. Many of the publicly traded companies in physical and digital mining are listed in Canada and the USA. The new momentum that is now coming into business can offer investors exciting entry opportunities. This could also fuel the M&A business in the next few months and redistribute the market shares in the ecosystem.