Wed. Dec 1st, 2021


China’s ban on cryptocurrency mining in May caused an exodus of miners and a global race to relocate millions of the clumsy, power-intensive machines they use to solve complex puzzles and earn bitcoin.

Fourteen of the world’s largest crypto-mining companies 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 machines has been hastily shifted to the US, Canada, Kazakhstan and Russia.

Bit Digital, one of the largest U.S.-listed crypto-mining companies, has hired an international logistics firm to withdraw its property from China and is still waiting for a batch of nearly 1,000 machines to be released from the docks at New York Harbor to become.

“We started our naval migration in March 2020, which was a wonderful step afterwards. When the ban was announced, we had 20,000 miners in China, ”said Sam Tabar, chief digital officer at Bit Digital. Yet the company said it had to abandon 372 machines in China, which “reached the end of their useful lives”.

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

A tremaop that shows where 14 large crypto-mining companies sent their Chinese machines

When the ban hit, Toronto crypto-mining company Hut8 was bombarded with offers from panicked Chinese sellers, said Sue Ennis, the company’s VP of corporate development and investor relations. “We got calls from suppliers that were pretty opaque and one-sided,” she said. “They will ask us to pay $ 20 million without any charge if it does not show up or arrives broken.” The company finally added 24,000 machines in June, from Chinese company MicroBT.

The “insane liquidations” caused by China’s ban caused the price of an Antminer S19, a popular model among industrial miners, to fall by 41.7 percent from May to July, according to mining company Luxor. mining shown.

Chinese crypto-mining machine maker Bitmain, the maker of the S19, sold 30,000 machines to Marathon Digital Holdings, a mining company in Las Vegas, in August; while Terawulf bought another 30,000 in Maryland. The company announced in June that it was suspending sales of its machines to “help the industry move smoothly” and reduce “market pressure”.

Outside the US, Kazakhstan has become a leading mining center. FT data show that most of the machines going to Kazakhstan came from the Chinese mining company Bitfufu, which shipped 80,000 machines to farms in Kazakhstan, and BIT Mining, which shipped 7,849 machines by August.

Another beneficiary of China’s ban was Russia, where Moscow-based infrastructure host Bit Cluster received more than 5,000 machines from China in the weeks following China’s ban on cryptocurrency mining, while Russian crypto-mining company BitRiver said it had since the ban now houses 1.8 million. machines of exiled Chinese miners.

“The focus of the market has shifted from a lack of equipment to a lack of space for its placement,” said Roman Zabuga, a spokesman for BitRiver. A few weeks before the ban, the company had to turn down an agreement with a Chinese customer who wanted to download another million machines, he said.

According to Jaran Mellerud, a research analyst at Arcane Crypto, just under 700,000 Chinese machines have not been turned on again after the ban and are likely to be put in storage. Since many of these are older generation machines, like the Antminer S9, it is less cost effective to ship them to places like the United States. In July, the price of an S9 dropped to just $ 367.

Man typing on a computer surrounded by cryptocurrency equipment
Crypto-mining companies face competition from local people building their own rig © Andrey Rudakov / Bloomberg

This has led to older generation machines being scattered to less established mining sites such as Venezuela or Paraguay, where there is less regulatory stability but cheap electricity prices.

Juan Jose Pinto, co-founder of Doctor Miner, a mining company in Caracas, said the Chinese ban “is a wonderful opportunity”. “We have so far been contacted by three different major Chinese miners to house about 7,000 machines,” he said. “If we had the resources, we could have housed a lot more.”

Pinto said its company pays about $ 0.01 per kWh for electricity, which means it can effectively use older, more power-hungry machinery like Antminer S9s. Although these machines are shaky and more prone to breakdown, Pinto and his team have found imaginative ways to keep them running.

“We have what we call ‘the cemetery’, where we have miners who do not work, but have parts that are,” Pinto said. “If I have one machine with four broken parts and another machine with six broken parts, I will unite them and hopefully build one good miner.”

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

And because of Venezuela’s troubled economy, cryptocurrency mining is a way for locals to supplement their earnings. “People mine in their homes with just one machine,” Pinto said. “In other countries there are some big guys with farms, here are thousands of people with small farms. Making $ 100 extra a month makes a big difference for them. ”

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