The Future Markets of Bitcoin Mining

Bitcoin mining has seen great upheaval and many relocations in the last two years.

Since China banned Bitcoin mining on its territory in 2021, droves of miners relocated their mining operations, mostly into the US, but many also went into Kazakhstan and Russia.

Kazakhstan has about 20 percent of total global mining operations and is thus the second biggest mining country after the USA. However, Kazakhstan has been battling with electricity supplies and miners have had to cease operations due to power outages. Further, government has put in regulations to curb electricity usage of miners, and many are looking to move their operations elsewhere as a stable power supply is indispensable to the industry.

The EU is concerned about crypto in various ways, one of which is the high energy consumption associated with mining and member countries‘ quest to meet the Paris Climate Agreement. European governments are grappling with legislation to govern crypto regulation throughout the EU. Work on the regulatory framework for crypto is in draft form and will be implemented as the Markets in Crypto Assets (MiCA) bill, which will govern cryptocurrency adoption in the EU.

The USA are, and are going stay the main location for crypto miners. Power supply is sufficient, there is no political unrest, and there are many locations in various states where huge pieces of land are available for containers to house thousands of miners next to power stations and main supply lines. However, electricity prices have increased in most parts of the US, and for crypto mining to be profitable, mining needs to make use of the cheapest possible power.

Russia has plenty of power and land to accommodate big mining locations. Russia’s legislation is positive towards the mining and trading of Bitcoin, and since Russia’s invasion of the Ukraine, trading volumes between the Russian Ruble and Bitcoin increased as the ruble fell to record lows.

The West‘s sanctions against Russia include the ban of a number of Russian banks from SWIFT, the main international payment system needed to conduct international money transfers. The increased use of Bitcoin and the Chinese payment system UnionPay mitigates some of the impact of the West’s financial sanctions. Russia’s finance ministry submitted a draft bill to regulate cryptocurrencies that makes it necessary to identify crypto traders. Russia creates an oppportunity for business in crypto and also allows mining operations on its soil.

Due to Russia’s invasion of the Ukraine and the West’s response of widespread economic and financial sanctions, moving mining operations to Russia is, at least in the short- to medium term, not an option. In the long run, however, and when peace prevails again in the region, Russia provides all the conditions that are necessary for Bitcoin mining operations to flourish.

Russia has an abundance of power, with a mixture of hydro, nuclear and gas powering the ten biggest Russian power stations. Russian power is much cheaper than power in the USA, which makes Russia more profitable for miners. The Russian government is amenable to Bitcoin mining and trading. After the finalisation of legislation for the regulation of Bitcoin, Russian companies will be able to use cryptocurrencies for their businesses.

Cryptocurrencies are part of Russia’s financial system, and they are being used more since the economic and financial sanctions against Russia.

Global Bitcoin mining is going to keep changing, but it is going to stay and will continue to garner the support of the big players in the financial world.

References:

• https://www.coindesk.com/business/2022/01/25/kazakh-crypto-miners-cut-off-from-electricity-supply-until-end-of-january/
• https://www.coindesk.com/markets/2022/02/28/ruble-denominated-bitcoin-volumes-surges-to-9-month-highs/
• https://www.reuters.com/markets/europe/russian-authorities-propose-conflicting-plans-crypto-regulation-2022-02-18/
• https://decrypt.co/94157/eu-lawmakers-drop-bitcoin-ban-draft-crypto-regulations
• https://www.btc-echo.de/newsticker/ukraine-krieg-eu-kommission-krypto-sanktionen-135972/