The U.S Has Become The Top Destination For Bitcoin Mining – Beating Out China For The Very First Time

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According to new statistics from the University of Cambridge, the United States is now the top spot for bitcoin miners globally, breaking China’s stronghold on the industry after Beijing’s cryptocurrency crackdown pushed miners rushing to new locations.

As of July, the United States accounted for over a third (35.4 percent) of bitcoin’s hashrate (a measure of the mining network’s computing power), according to the Cambridge Centre for Alternative Finance. The figure is the highest proportion recorded for the US, up from around 21.8% as of May and approximately 4.2% a year ago.

America’s newfound mining prowess can be attributed in part to China. China was the market leader in terms of hashrate a year ago. However, Beijing’s crypto crackdown in the spring effectively shut down half of the world’s bitcoin miners. In what became known as “the great mining migration,” miners began fleeing China in droves, searching for the world’s cheapest energy sources. As a result, China’s average monthly share of worldwide hashrate was eliminated in July, according to the latest Cambridge statistics, a significant shift from September 2020, when China had over 67 percent of the market.

“The whole narrative of China controls bitcoin is now destroyed,” said Boaz Sobrado, a London-based fintech data analyst.

The US ticks a lot of boxes for migrant bitcoin miners searching for a new home. For one, states like Texas boast some of the world’s lowest energy prices, a significant incentive to miners who compete in a low-margin industry, where their only variable cost is typically energy.

The US also has an abundance of renewable energy sources. Washington state is a haven for hydroelectric mining farms. New York generates the most hydroelectric electricity. Meanwhile, Texas’s contribution to renewables increases with time, with wind power accounting for 20% of total electricity generation in 2019. The Texas grid is also constantly adding extra wind and solar power.

Furthermore, among those who believe bitcoin is harmful to the environment, the shift toward zero-emission, renewable energy sources have already begun to redefine the perspective.

“Mining is price sensitive, so as to seek out the lowest-cost power and the lowest-cost power tends to be renewable because if you’re burning fossil fuels … it has extraction, refinement and transport costs,” Blockstream CEO Adam Back said.

Apart from lower electricity prices, certain states in the US, such as Texas, have a deregulated power grid with accurate spot pricing that allows customers to choose between power suppliers. Its political leaders are also pro-crypto. Those are excellent conditions for miners looking for cheap energy supplies.

“If you’re looking to relocate hundreds of millions of dollars of miners out of China, you want to make sure you have geographic, political, and jurisdictional stability. You also want to make sure there are private property rights protections for the assets that you are relocating,” said Darin Feinstein, co-founder of Core Scientific.

America’s meteoric rise is due to a combination of luck and hard work. For years, the US has been discreetly increasing its hosting capacity. As a result, businesses across the country gambled that if enough infrastructure were in place before the arrival of bitcoin miners, they would eventually set up shop in the country.

Finally, the gamble paid off. There was no demand for massive bitcoin farms when bitcoin collapsed in late 2017, heralding a multi-year crypto winter. US mining companies leaped at the chance to deploy inexpensive capital to establish the mining ecosystem in the US.

According to Luxor Mining’s Alex Brammer, emerging capital markets and financial instruments in the mining sector also contributed to the industry’s rapid growth. He claims that many American companies grew swiftly after acquiring investment by leveraging a multi-year track record of success and using existing funds as collateral.

Moreover, the pandemic also contributed. Even though the global outbreak shut down wide chunks of the economy, the following stimulus payments benefited mining companies in the US.

“All the money printing during the pandemic meant that more capital needed to be deployed,” explained bitcoin mining engineer Brandon Arvanaghi.

“People were looking for places to park their cash. The appetite for large-scale investments had never been bigger. A lot of that likely found its way into bitcoin mining operations in places outside of China,” Arvanaghi added.

However, not all miners are fleeing to better opportunities. Kazakhstan ranks second to the US in the global bitcoin mining market share, accounting for 18.1 percent of all crypto mining. In addition, it hosts coal mines, which provide a cheap and plentiful supply of electricity and a boatload of carbon emissions. However, several mining experts believe that Kazakhstan is merely a stopover on a more extended west migration.

Big miners using older-generation equipment, according to Brammer, will migrate there in the short term. “But as older-generation machines reach the end of their service lives, those companies will likely deploy new machines into more stable and energy-efficient and renewable jurisdictions,” he said.

Kazakhstan’s popularity is projected to suffer at the hands of a new presidential decree imposing higher taxes on cryptocurrency miners starting in 2022.

“This will significantly change the incentives for people to deploy capital in Kazakhstan,” said Brammer.

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