Bitcoin miners make US industry leader after China crackdown as climate fears weigh in

The United States is now the world leader in Bitcoin mining, according to data from the Cambridge Bitcoin Electricity Consumption Index (CBECI), which tracks Bitcoin’s energy consumption by geography.

According to data added to the index, the United States currently accounts for 42.7% of the Bitcoin network hashrate, a metric unit that measures the energy consumption of the Bitcoin network. Up 14%, the growth of the US hashrate – also known as hashpower – reflects the changing geopolitical environment of Bitcoin mining, at a time when growing concerns about the environmental impact of such a activity weigh on the industry.

The change in the industry follows the Chinese government’s ban on cryptocurrency mining in May, which sent shockwaves through the cryptocurrency industry and put temporary pressure on Bitcoin ( BTC-USD). As a result, mining operators located in China were forced to leave the country.

For relative crypto veterans like Josh Goodbody, the move of Bitcoin miner operators from China to the United States is “an extremely positive development for the future of Bitcoin.”

A year ago, mainland China dominated Bitcoin’s total hashrate, accounting for 89% according to CBECI figures. This has proven to be a concern for Bitcoin businesses and investors according to Goodbody, a financial markets and derivatives attorney who serves as COO of the Qredo Decentralized Finance Infrastructure (DeFi) Protocol.

“In many ways, this has been a quick fix to the long-standing concern that China contains an excessively large concentration of Bitcoin’s hash power that is fully exposed to national and local governments with hostile attitudes towards assets. crypto, ”said Goodbody, who has worked for crypto exchanges like Huobi and Binance in the past.

In China, Bitcoin mining a year ago relied on a mix of cheap renewable energy available under hydroelectric dams – especially in its Sichuan province – in addition to fossil fuels in the northern provinces. This proved problematic, when the country’s dry season made hydropower less profitable.

Also measured by the hashprice, the profitability of a bitcoin miner can be measured by the Hash price index, a figure tracked by crypto-mining pool and analytics firm Luxor Mining. While the metric declined in September, it has since rebounded as Bitcoin nears its 2021 highs of nearly $ 65,000.

As the price of Bitcoin recovered from its mid-July low, less intense competition resulted in higher profitability for the remaining miners, mainly due to the slow relocation of mining operators. Chinese. In North America, industry professionals have called this period the “golden age” for Bitcoin mining.

Bitcoin and the environment

SpaceX founder and Tesla CEO Elon Musk watches him visit the construction site of Tesla’s gigafactory in Gruenheide, near Berlin, Germany on May 17, 2021. REUTERS / Michele Tantussi

But energy consumption remains one of the hottest issues regarding Bitcoin, a highly volatile cryptocurrency with a market capitalization that is currently over $ 1,000 billion.

The currency’s current total energy consumption is 99 terawatt-hours (TWh) per year, almost as much as gold mining (131 TWh per year). For comparison, refrigerators consume up to 104 TWh per year and televisions in the United States consume 60 TWh per year.

As the world becomes increasingly environmentally conscious due to climate change, Bitcoin’s energy consumption is increasingly being monitored.

Earlier this year, billionaire entrepreneur and Tesla CEO (TSLA) Elon Musk momentarily sparked a fury after he reversed his decision to let his electric vehicle company accept BTC as a form of payment. At the time, Musk raised environmental concerns regarding the amount of fossil fuels used by the Bitcoin mining industry. That same month, China also used environmental fears to ban crypto mining.

September 2020 Cambridge University survey found that 39% of Bitcoin mining is powered by renewables – significantly better than the 12% renewables that made up total energy use in the United States for the same period, according to The data compiled by the US Energy Administration.

But the specialized nature of mining, in addition to a legitimate demand for more transparent data, has made the discussion of Bitcoin’s climate impact both opaque and polarizing.

Observers say that because miners compete for profit, they have an incentive to seek out the cheapest and most reliable source of energy available. The contingent point is whether the source of energy available to mining operators comes from renewable energies or fossil fuels.

Over the past two years, a number of energy producers whose profitability is slowing and who are burning fossil fuels have made deals with Bitcoin mining companies.

These include Greenridge Generation, a power plant in New York’s Finger Lake area that emits methane as a byproduct of natural gas, and now houses more than 15,000 Bitcoin mining computers, also known as ASICs. Like other non-renewable energy producers, the plant purchases carbon credits to offset its emissions.

However, market players like Ayesha Kiani, vice president of business development at crypto-focused quantum investment firm LedgerPrime, told Yahoo Finance that the increase in the number of mining operations in the United States was a good thing. For comparison, Kiani pointed out, other countries may not have the existing technology and infrastructure to make Bitcoin mining more renewable.

“The US government is also actively working on the climate crisis, which is also helping to find a renewable solution as soon as possible,” Kiani said.

In August, BlackRock (BLK), the world’s largest asset manager, which also took a proactive step in making ESG investing a core part of its $ 9 trillion portfolio, invested $ 44 million. dollars in publicly traded crypto mining companies Marathon Digital Holdings (MARA) and RIOT Blockchain (RIOT).

The crypto industry has also launched two US-focused initiatives: the Bitcoin Mining Council and the Crypto Climate Agreements, which aim to improve the transparency and environmental impact of crypto mining.

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David Hollerith covers cryptocurrency for Yahoo Finance. Follow it @dshollers.

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