(Bloomberg) — About 6,000 old Bitcoin mining machines in the U.S. will soon be idle and sent to a warehouse in Colorado Springs, where they will be refreshed and used by overseas investors looking to profit from mining in a low-cost environment. It will be resold to a buyer.
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Wholesaler SunnySide Digital accepts equipment from mining clients and operates a 35,000 square foot facility. Some of the hundreds of thousands of older machines will be received and refurbished around his major quadrennial update of the Bitcoin blockchain.
The event in late April, known as the halving, will reduce rewards, the main source of income for miners, who are trying to reduce the impact by upgrading to the latest and most efficient technology. With electricity being the biggest expense, publicly traded mining companies such as Marathon Digital Holdings and Riot Platforms need to lower usage costs to maintain profit margins. Their old computers may still be profitable, but that's unlikely in the US.
Taras Kulik, CEO of Sunnyside Digital, which has resold U.S. computers to miners in countries such as Ethiopia, Tanzania and Paraguay. “This is a natural transition” for buyers of older machines operating in parts of the world where electricity is cheapest, Kulik said. Uruguay. “This is accelerated by the half-life.”
Ethan Berra, chief operating officer of crypto mining services and logistics provider Luxor, estimates that about 600,000 S19 series computers, the majority of machines in use today, are located outside the United States. It is said to have leaked out and moved mainly to Africa and South America. Seattle Technology.
Bitcoin mining uses specialized machines to verify transactions on the blockchain and earn fixed token rewards for operators. Anonymous Bitcoin creator Satoshi Nakamoto was obsessed with the quadrennial halving in order to maintain the hard cap of 21 million tokens. Next month's event will be the fourth since 2012, and the reward will drop from the current 6.25 Bitcoin to 3.125 Bitcoin.
Bitcoin has risen about 50% this year to about $63,500, but is down from its all-time high of $73,798 on March 14th. With the halving just weeks away, bringing more efficient machines online becomes even more urgent. This is because continuing to use old equipment can be dangerous. Electricity costs will be close to or exceed mining income.
Jaran Mererud, CEO of Dubai-based Hashlabs Mining, said the S19 series and similar models may not be profitable to operate in the United States after the halving, but they may not be viable in Africa. In some areas, he said, “they can still generate reasonable returns and have a long lifespan if hosted.” leases data center space in Ethiopia and provides hosting services to Bitcoin miners.
price fall
Lauren Lin, Luxor's director of business development, said some buyers are waiting to buy older computers until after the event, expecting prices to drop further. According to Luxor, which operates a used machinery trading desk, a used S19 model costs about $7,030 as of March 2022. A year later, the price has dropped dramatically to about $900 as Bitcoin prices have fallen, and this month it has fallen to about $427, and is estimated to sell for about $356 in May after the halving. ing.
There are some miners in the United States who do not sell their hardware, choosing instead to relocate their equipment to regions with lower electricity costs or to third-party data centers. Nuo Xu, who has two locations in Texas, is traveling to Ethiopia, Nigeria and several other countries this month to survey the locations of about 6,000 old computers.
“There are additional risks for my machine in Africa, but I have to move there,” he said. “Lower electricity rates outside the U.S. mean it takes much less time to recoup overhead costs, and labor costs and building materials are also much cheaper,” he said. Ta.
hosting fees
Miners around the world who do not have their own facilities typically pay a hosting fee that includes electricity, labor, and a third-party operator. According to Xu's experience, the U.S. rate is about 7 cents per kilowatt hour for him. In Ethiopia, which has loosened regulations on cryptocurrency mining and increased electricity generation, the rate is about 5 cents, Hashlab's Merelud said. This two cents of his is huge for the minors.
Electricity costs in Ethiopia itself are about 3 cents per kWh, said Hiwot Eshetu, director of marketing and business development for Ethiopian Power. In the U.S., that range is about 3 cents to 6 cents, based on Luxor estimates.
“Ethiopia is becoming a really big player in the digital mining ecosystem,” Sunnyside's Kulik said, adding that the company has signed contracts to help move between 20,000 and 40,000 rigs to the East African country. He added that he was negotiating.
Not all U.S.-based equipment leaves the country. For publicly traded companies, this process can be more difficult as risk-averse shareholders must be considered. There are also hesitations about moving machinery overseas due to transportation costs, damage, and safety concerns.
Publicly traded BitDigital, one of the largest Bitcoin miners, has older-generation computers sitting in a warehouse in Houston.
“These machines basically collect dust from time to time,” says CEO Sam Tabar. But the New York-based company is holding on to the computers because it could make a profit even if it retires them if Bitcoin prices rise, he said.
large sum of money
Miners have been preparing for the halving for years, spending big bucks to replace old hardware. Thirteen major publicly traded Bitcoin mining companies, including Riot Platforms and CleanSpark Inc., have ordered more than $1 billion worth of machines since February 2023, according to crypto mining researcher TheMinerMag.
Five major miners raised more than $2.7 billion through stock sales in the two years that ended in December. Researchers say the same miners have collected an additional $840 million since the beginning of this year.
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