China’s Exile Crypto Machines Fueling a Global Mining Boom

Of China Cryptocurrency Mining Ban in May triggered an exodus of miners and a global race to relocate the millions of bulky, power-hungry machines they use to solve complex puzzles and earn bitcoins.

Fourteen of the world’s largest cryptocurrency miners moved more than 2 million machines out of China in the months following the ban, according to data collected by the Financial Times. The lion’s share of the machinery was quickly shipped to the US, Canada, Kazakhstan and Russia.

Bit Digital, one of the largest cryptocurrency miners listed in the United States, has hired an international logistics company to mine its assets from China and is still waiting for a batch of nearly 1,000 machines to be shipped. shipped from the docks at the Port of New York.

“We started moving our fleet in March 2020, which is a great move. When the ban was announced, we had 20,000 miners in China,” said Sam Tabar, chief strategy officer at Bit Digital. However, the company said it had to give up 372 of the machines in China, which were “out of date”.

Eight of the 10 largest public farms based in North America have expanded the number of machines in their fleets since China’s ban, FT figures show.

A treemaop showing where 14 major crypto miners have sent their Chinese machines

When the ban was introduced, Toronto crypto miner Hut8 was hit with offers from panicked sellers in China, said Sue Ennis, VP of corporate development and home relations investment company said. “We get calls from vendors that are pretty lackluster and one-sided,” she said. “They’re going to ask us to pay $20 million with nothing back if it doesn’t arrive or arrives damaged.” Finally, the company added 24,000 units in June, from Chinese company MicroBT.

According to analysis by mining company Luxor, the “crazy liquidation” due to the Chinese ban has caused the price of Antminer S19, a popular model among industrial miners, to drop 41.7% from May. to July.

Chinese crypto mining machine maker Bitmain, which makes S19 machines, sold 30,000 machines to Marathon Digital Holdings, a Las Vegas-based mining company, in August; while Maryland-based Terawulf bought another 30,000. The company announced in June that it would be suspending sales of its machinery to “help the industry transition smoothly” and relieve “major pressure” on the market.

Outside of the United States, Kazakhstan has become a leading mining hub. FT data shows that the majority of machines arriving in Kazahstan come from Chinese mining company Bitfufu, which shipped 80,000 machines to farms in Kazakhstan, and BIT Mining, which shipped 7,849 machines in August.

Another beneficiary of China’s ban is Russia, where in the weeks following China’s crypto mining ban, Moscow-based infrastructure hosting company Bit Cluster received more than 5,000 machines from China, while Russian cryptocurrency miner BitRiver said that since the ban, the company is currently hosting 1.8 million machines by exiled Chinese miners.

“The focus of the market has shifted from lack of equipment to lack of space to place it,” said Roman Zabuga, a spokesperson for BitRiver. A few weeks before the ban, the company had to decline a deal with a Chinese customer looking to sell off another million units, he said.

According to Jaran Mellerud, a research analyst at Arcane Crypto, just under 700,000 Chinese machines haven’t been turned back on since the ban and are likely in storage. Since many of these are older generation machines, like the Antminer S9, it would be less cost-effective to ship them to locations like the US. In July, the price of the S9 dropped to just $367.

Man typing on computer surrounded by cryptocurrency mining equipment
Cryptocurrency miners are facing competition from locals building their own rigs © Andrey Rudakov/Bloomberg

This has resulted in older generation machines being dispersed to less established mining locations such as Venezuela or Paraguay, where there is less regulatory stability but cheap electricity.

Juan Jose Pinto, co-founder of Doctor Miner, a mining company in Caracas, said China’s ban “is a great opportunity”. “So far, we have been contacted by three different major Chinese mining companies to supply around 7,000 machines,” he said. “If we had the resources, we could store more.”

Pinto says his company pays about $0.01 per kWh of electricity, meaning it can effectively use older, more power-hungry machines like the Antminer S9s. Although these machines are creaker and more prone to failure, Pinto and his team have found creative ways to keep them running.

“We have what we call a ‘cemetery,’ where we put miners that are inactive, but have working parts,” said Pinto. broken and another machine has six broken parts, I will merge them and hopefully make a good miner.”

Digital Assets, an Asunción-based company, is preparing to welcome 15,500 miners in the coming months but faces competition from some Paraguayan locals who have already started buying machines and mining independent.

And given Venezuela’s crumbling economy, cryptocurrency mining is a way for locals to supplement their income. “People mine from their homes with just one machine,” says Pinto. “In other countries, there are a few big guys with farms, here there are thousands of people with small farms. Making an extra $100 per month makes a huge difference for them.”

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