Before China decided to dump all its bitcoin miners, they were already going in droves and new data from the University of Cambridge shows that they were probably headed to the United States.
The US quickly became the new favorite of the bitcoin mining world. It is the second largest mining destination on the planet, accounting for approximately 17% of all world bitcoin miners since April 2021. That is an increase of 151% compared to September 2020.
“In the last 18 months, we’ve seen serious growth in mining infrastructure in the U.S.,” said Darin Feinstein, founder of Blockcap and Core Scientific. “We’ve seen huge growth in mining operations looking to relocate to North America, mostly to the United States.”
This dataset does not include a mass mining exodus from China, which led to half of the world’s miners stop working offline, and experts tell CNBC that the U.S. share of the mining market is probably even higher than the figures show.
According to newly released data from Cambridge, just before the start of the mining ban in China, the country accounted for 46% of total global hashrate, an industrial term used to describe the collective computational power of the bitcoin network. That is a sharp drop from 75.5% in September 2019, and the percentage is probably much lower given the ongoing exodus.
“500,000 former Chinese mining platforms are looking for homes in the United States,” said Fred Thiel of Marathon Digital. “If deployed, it would mean North America would have close to 40% of the global hashrate by the end of 2022.”
Increasing American dominance is a simple case of preparation for happiness. The United States has been quietly building its household capacity for years.
Before bitcoin miners actually started coming to America, companies across the country gambled that they would eventually, if there was proper infrastructure, establish trade in the United States.
That cube seems to be worth it.
When bitcoin crashed in late 2017 and when the wider market entered a multi-year crypto winter, there was not much demand for large bitcoin farms. U.S. mining operators saw their opening and took the opportunity to invest cheap money to build a mining ecosystem in the states.
“The big miners, who are publicly traded, have managed to raise capital for big purchases,” said Mike Colyer, chief executive of the digital currency foundry company, which helped bring in over $ 300 million of mining equipment to North America.
Companies like North American crypto mining operator Core Scientific continued to build hosting space throughout the crypto winter, so they had the capacity to connect new equipment, according to Colyer.
“Most of the new equipment produced from May 2020 to December 2020 was shipped to the United States and Canada,” he said.
Alex Brammer of Luxor Mining, a cryptocurrency fund built for advanced miners, points out that the maturing capital markets and financial instruments around the mining industry have also played a big role in the rapid rise of that industry in the US. Brammer says many of these U.S. operators have been able to start expanding rapidly after securing financing by using multi-year records of profitability and existing capital as collateral.
Covid also played a role.
Although the global pandemic closed large parts of the economy, the payments that followed showed a boon for American mining companies.
“All the printing of money during the pandemic meant that more capital needed to be invested,” explained bitcoin mining engineer Brandon Arvanaghi.
“People were looking for places to park cash. The appetite for big investments has never been greater. A lot has probably been found in bitcoin mining operations in places outside China,” Arvanaghi continued.
The seeds of American migration began in early 2020, according to Colyer. Before the sudden suppression of Beijing, Chinese mining dominance had already begun to decline.
Part of the complaint is that the US marks a lot of fields for these migrant miners.
“If you want to relocate hundreds of millions of dollars of miners from China, you want to make sure you have geographical, political and jurisdictional stability. You also want to make sure there are private property rights protections for the property you are relocating,” Feinstein said.
It also helps that the United States is home to some of the cheapest energy sources on the planet, many of which are renewable. Because miners compete heavily in low-margin industries, where their only variable cost is usually energy, they are encouraged to migrate to the world’s cheapest energy sources.
Thiel expects that most new miners moving to North America will be supplied with renewable energy or gas that is offset by renewable energy loans.
Although the founder of Castle Island Ventures, Nic Carter, points out that American mining is not fully renewable, he says miners here are much better at selecting renewables and purchasing.
“Migration is definitely net positive,” he said. “Moving hashrat to the United States, Canada and Russia will mean much lower carbon intensities.”