The world's top bitcoin mining rig maker has suspended sales of its machines for spot delivery globally following Beijing's crackdown on the cryptocurrency industry in the country.
Bitmain Technologies is stopping sales in an effort to prop up local prices after crypto miners fleeing China have started dumping used mining rigs on the market. By postponing sales, Bitmain can help these miners exiting the industry get better prices for their machines. In addition, it could also be a benefit if the reduced supply buoys prices over the longer term for new machines.
A spokesman for the company confirmed that it would continue to sell gear for future delivery of devices used to mine smaller altcoins. But he did not say when the business would start selling machines again.
Miners leaving China due to government crackdown
Back in May, China's cabinet – the State Council – called for a renewed crackdown on cryptocurrency mining and trading activities. In response, local governments were quick to sever power to mining facilities in their jurisdictions.
This crackdown is spurring more and more miners to uproot or abandon their operations, heading to more welcoming countries, including the U.S. and Canada. In the process, they've begun to flood the domestic market with cheap machines.
Top-of-the-line mining machines from Bitmain and other mining hardware companies are now being sold at 150 yuan ($23) per THash/second – the reference unit for their computing power – on the second-hand market. In comparison, these same machines were selling at 600 yuan ($92.64) back in April, when Bitcoin hit an all-time high of $64,870.
Meanwhile, to help clients moving out of China, Bitman recently held a closed-door event where it pledged to serve as a matchmaker to connect miners with data centers in countries like Kazakhstan and the U.S.
China's crackdown on cryptocurrency mining comes amid concerns of both the digital coin's environmental impact as well as their decentralized nature. (Related: China's central bank calls on top executives to reinforce crypto ban.)
Digital currencies require large amounts of computing power for transactions and other functions, such as creating new coins. This draws a lot of energy – often in the gigawatt range – to keep these systems running. While part of this massive power draw is supplied by renewable energy – such as hydroelectric plants – a good amount also comes from fossil fuels.
But a bigger issue for Beijing may be cryptocurrency's decentralized nature. In a recent statement calling on financial leaders to enforce a ban on cryptocurrency trading, China's central bank said that this decentralized nature made cryptocurrencies ripe for money laundering and other illegal activities.
China's crackdown leads miners to migrate to the U.S.
As China's miners abandon the country in droves, many are turning to the West, where regulations are much looser. This has resulted in what has been called "the great mining migration" to places such as Texas.
Despite a lack of power reserves – which led to the days-long blackouts in February – Texas has some of the world's lowest energy prices with a deregulated power grid that lets customers choose power providers. At the same time, its share of renewables is also growing. More importantly, its political leaders are very pro-crypto.
"We have governors like Greg Abbott in Texas who are promoting mining," says Brandon Arvanaghi, a former security engineer at crypto exchange Gemini. "It is going to become a real industry in the United States, which is going to be incredible."
Other states that miners are targeting include Wyoming, which is also trending towards being pro-bitcoin.
But there are some hurdles that remain before the U.S. can become a global mining destination. The lead time to actually build the physical infrastructure necessary to host miners takes around six to nine months explained Castle Island Ventures founding partner Nic Carter to CNBC.
"The U.S. probably can’t be as nimble as other countries in terms of onshoring these stray miners," he said.
Then there's actually getting mining equipment to the U.S. In addition to companies like Bitmain suspending sales of new mining rigs to try to keep prices high, there's also a shipping container shortage thanks to the Wuhan coronavirus (COVID-19) pandemic.
Perhaps the biggest question is whether these states' power grids can handle the needs of crypto mining. On top of the blackouts Texas suffered in February, the state is once again facing a possible energy crisis due to the impending heatwave out west. The Electric Reliability Council of Texas has already called for Texans to start conserving energy because of this.
Should crypto miners start operating in Texas in droves, it could cause further strain to an already overworked energy grid.
Follow BitcoinCrash.news for more on how the U.S. may be affected by the fallout from China's crypto crackdown.
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