The "Great Lockdown" is redesigning the bitcoin mining landscape as the economic crisis makes smaller businesses less profitable and access to Chinese hardware supply chains is critical.
Two examples of mining during the pandemic: Canada and Argentina
"Many miners rely on the price of bitcoins to sweeten the post-halving period in order to remain operationally profitable," said F2Pool corporate director Thomas Heller, leader of one of the largest bitcoin mining operations in Asia.
"In early March, some miners liquidated their bitcoin-backed loans and other operators had to shut down their machines." It is difficult to say which miners now face huge debts.
Among those that have set public records, the Canadian startup Hut 8 owes approximately $ 14 million to Genesis Global Capital, a subsidiary of the American crypto giant Genesis Trading.
Canadian mining operations like Hut 8 have an advantage over some overseas competitors: they are considered "essential services" according to the federal government's strategy against COVID-19.
In addition, Hut 8 aims to have updated equipment from Chinese hardware vendors, which are more efficient than current models. BitPatagonia co-founder Walter Salama, Argentina, whose mining company is temporarily closed by the coronavirus block, said the cost of new machines is his most pressing concern.
Salema predicted that "medium and small miners" could disappear when those who provide funds and hardware "focus on the larger ones." If this were to happen, Salema added, it would undermine "the fantasy of decentralization".
It is clear that governments have a significant impact on whether bitcoin mining can remain profitable in their respective jurisdictions. In general, mining operations require both low-cost electricity and government room for maneuver to remain competitive during volatile cycles.
Regions with solid mining companies, such as China and Russia, have favorable regulatory environments. Russia, in particular, is home to a state-owned power plant that rents space to cryptocurrency miners.
If Salama manages to get and operate the new hardware in Argentina before halving the May reward, local operating costs will still impact its profitability.
At the same time, Chinese miners are expected to obtain a lot of low-cost energy during the annual "rainy season" from July to September, thanks to national hydroelectric projects.
The strength of local currencies is another important factor. Russia's mining industry has witnessed a similar impact situation, in which a drop in local currency value has offset the volatility of bitcoin. Even if the price of bitcoin falls in dollars, it could rise in rubles.
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