Bitcoin miners cornered between electricity prices and market crash

Bitcoin Miner Earnings Bottom Before Recovering 20% ​​in 12 Hours

Key facts:
  • Miners in Chelan, Washington will pay 30% more for the electricity they consume.

  • Bitcoin and the entire cryptocurrency market continues to fall.

The blow that the fall of the cryptocurrency market represents for Bitcoin miners is indisputable, but to this is added the increase in the price of electricity that has been applied in various places around the world to companies that are dedicated to this activity. The sum of both factors hits very hard the income that can be received from mining.

The most recent case takes place in the state of Washington, United States, more specifically in Chelan County. Over there, companies dedicated to cryptocurrency mining will have to pay 30% more in their electricity rate.

Previously, large-scale Bitcoin miners in Chelan paid for electricity at a standardized price for “high-density” consumers. However, as of this month, the mining companies would enter a new category known as “Tariff 36” which implies the aforementioned increase.

Advertising

Bitcoin miners cornered between electricity prices and market crash

The reason that the Chelan County Public Service District (PUD) alleges for applying such measures against Bitcoin miners is their high demand for energy. The initiative to increase the cost of electricity for these companies has been underway since 2018. The increase was expected to take effect in January of this year, but it was not applied until June 1.

Chelan PUD Commissioners approved transition contracts for three local mining companies. This is a relaxation in applying the new electricity rates because, when they were approved, such companies had very limited capital due to significant investments they had made in their infrastructure.

The myth of electricity consumption of Bitcoin miners

Since Bitcoin mining became widespread and ceased to be just a home activity to become an industry, there is a certain level of concern about the amount of energy used for this purpose.

Advertising

Bitcoin miners cornered between electricity prices and market crash

It is true that mining bitcoins requires a considerable demand for electrical energy thanks to its consensus algorithm, the proof of work (PoW). However, by accusing mining of excessive electricity consumption, it could be ignoring other branches of the technology industry that would require similar amounts of energy.

Malachi Salcido, CEO of Salcido Enterprises, told local media of Chelan that it would be forced to convert its three cryptocurrency mining farms into data centers. This as a result of the rise in the cost of electricity to miners.

Ironically, Salcido explains that these data processing centers require the same amount of energy as a mining farm of similar size. The detail is that these data centers are not punished with electricity rates like those of the miners, so it can be more profitable.

In Asia and South America they also punish Bitcoin miners

The ban on Bitcoin mining in China in 2021 prompted an exodus of miners to various countries around the world. After the United States, the country that received the most Bitcoin mining power was Kazakhstan.

The problem that Bitcoin miners in Kazakh lands see is that, as in other parts of the world, its impact is barely beginning to be felt when initiatives arise to condition and even limit its operation.

In the case of Kazakhstan, CriptoNoticias reported that the authorities of this country did not take long to apply increases in the cost of electricity to Bitcoin miners, after their flight from China. This despite the fact that said nation produces twice the energy it consumes. The measures have been escalating ever since, to the point of dismantling entire farms and establishing stricter regulations for mining companies.

In South America, the country that implemented a recent increase in electricity to Bitcoin miners is Argentina. From the beginning of 2022, the cryptocurrency mining farms located in the Province of Tierra del Fuego they do not have subsidies for your electricity consumption. For this reason, large-scale miners pay up to four times more than a common user for the energy used.

More expensive electricity and falling market prices: a nightmare for miners

There is a popular saying that “hunger was mixed with the desire to eat”. Cryptocurrency miners could be quite relatable to that refrain, particularly those who have been subject to rising electricity costs recently.

Increases in the cost of electricity service imply a decrease in the income received by miners for this activity. Now, if we add to that the fact that the price of BTC in the market is getting lower and lower, the profitability of this activity decreases by leaps and bounds.

CriptoNoticias reported yesterday that the price of bitcoin in the exchange market Already had fallen by 67% from its historical maximum in November 2021. Back then, BTC reached $64,698 per unit.

Bitcoin crash.
Bitcoin price drop from its ATH in November 2021. Source: CoinMarketCap.

The world energy crisis, the fall of the cryptocurrency market and the increase in the hashrate and the difficulty of mining in Bitcoin have caused those who dedicate themselves to this activity to use all the strategies they have at hand so that it remains profitable.

See also  New version of RaspiBlitz software arrives for Bitcoin and Lightning Network nodes

Leave a Comment

Your email address will not be published.