As China, Iran and other countries are turning their back on crypto and Bitcoin, in particular, the US is taking centre stage as the hub for Bitcoin mining and operation in the world.
Data from Cambridge University indicates that bitcoin miners from countries facing crypto bans are choosing to move to the United States to continue mining instead of complying with their governments.
According to a report by CNBC, America is now the second-largest mining destination in the world as of April 2021, this accounts for about 17% of global mining, an impressive 151% increase from September last year.
Blockcap and Core Scientific founder Darin Feinstein explains this phenomenon saying “For the last 18 months we’ve had a serious growth of mining infrastructure in the U.S. We.ve noticed a massive uptick in mining operations looking to relocate to North America, mostly in the U.S.”
World Turning Back on Crypto
Bitcoin began as an obscure concept in 2009 created by an even more mysterious creator Satoshi Nakamoto, a legendary name whose real identity remains unknown to this day. After an unimpressive four years following its release, its price rose to $770 by January 2014.
It was at this time that the first decentralized currency first started facing backlash from governments who were worried about its impact on their national currencies. China was the first to react to this threat by prohibiting financial institutions in the country from using Bitcoins. In fact, buying any real-world goods using virtual currency had been made illegal way back in 2009.
The country then followed up with a complete ban on all trading and mining activities in the country from 2018 through to 2020. Other countries like India and Iran have effected similar bans albeit for different reasons. In Iran’s case for instance, which banned mining just last month, the main reason was the huge burden placed on the nations electric grid due to energy-intensive mining farms.
Despite these bans, miners did not completely halt operations. Instead, they moved to locations that were more ‘crypto-friendly.’ This is where the United States comes in.
Land of Opportunity
In contrast to other governments, the US has been quite optimistic about Bitcoins and crypto. This is despite a number of cases of fraud and crashes that have made other governments, companies and individuals shy away from digital currencies.
Before miners started coming to the US, the country was not as active in the mining industry as it is today. Prior to the bans on mining and trading, China was number one. The country accounted for 46% of the global total harshrate (used to describe collective computing power of the bitcoin network) in 2020. In 2019 it was even higher at 75.5%.
Trying to compete with China’s dominance a number of companies in the US acquired and set up infrastructure to woo miners. Despite early hiccups, the gamble seemed to have eventually paid off as thousands of miners from China especially, relocated to the US for these opportunities.
Marathon Digital’s Fred Thiel explains “500,000 formerly Chinese miners are looking for homes in the US. If they are deployed, it would mean North America would have closer to 40% of global hashrate by the end of 2022.”
Mike Colyer CEO of Foundry a digital currency company took part in this massive bet when he facilitated the movement of over $300 million of equipment into North America.
“A majority of the new equipment manufactured from May 2020 through December 2020 was shipped to the U.S and Canada,” he explains.
While COVID may have negatively affected mining operations in most countries it was a blessing in disguise for miners in the US.
This is in part due to the stimulus packages distributed all through the country. A lot of this money needed an investment destination and crypto mining was one of the most attractive at the time.
“People were looking for places to park their cash. The appetite for large scale investment had never been bigger. A lot of that likely found its way into bitcoin mining operations in places outside of China” explains Brandon Arvanaghi, a bitcoin mining engineer.
In spite of this upturn in crypto sentiment in the US, some remain sceptical towards Bitcoin. And this is largely due to energy and climate concerns. As explained earlier, Bitcoin mining is a very energy-intensive activity that eventually takes a toll on the environment as most miners, especially in Middle Eastern and Far East Nations get their energy from coal.
This is the reason Tesla, spearheaded by tech billionaire Elon Musk rescinded on their announcement to accept Bitcoins as payment. He announced that the company would resume accepting Bitcoin when the energy used was about 50% renewable energy.
No matter Tesla’s sentiment the US is poised to be the central Bitcoin for the foreseeable future.