Since the political climate in China has changed to the disadvantage of the numerous Bitcoin miners in the country, they have been looking for a new place that entices them with cheap energy costs and a benevolent political attitude. They now seem to have found it.
For a long time, the People’s Republic of China was the dreamland for crypto enthusiasts who were dedicated to mining Bitcoin. The Middle Kingdom was compelling with its low electricity costs, as mining requires enormous amounts of energy. But the lack of regulation of cryptocurrencies and cheap labour also ensured that most Bitcoin miners stayed in China for years. But that is over now.
The Chinese government has now targeted the original cyber currency Bitcoin and, after numerous previous announcements, banned Bitcoin mining and activities related to the coin. As a result, countless Chinese Bitcoin farms have had their electricity cut off, which was promptly reflected in the Bitcoin hash rate. A disaster for companies whose business model consists solely of mining valuable coins.
A fallback option had to be found quickly. Due to the huge amounts of energy required for mining, one of the most important criteria for the new crypto-Eldorado is cheap energy. In addition, a benevolent political attitude towards cryptocurrencies is also required. Bitcoin miners have now found both basic requirements – in the US state of Texas.
In this respect, Texas convinces, first and foremost, with its low electricity costs. The electricity grid in the state is deregulated, which means that numerous different electricity providers offer electricity at lower prices due to increased competition. In addition, it is possible to conclude multi-year contracts with the suppliers, whereby a fixed amount of electricity is set. This means that the same amount is always paid over the years. In addition, the purchased electricity can be sold back to the electricity grid operator if it is not needed to the extent required. This is a good starting point for prospectors, which also offers planning security.
In addition to these positive primary conditions, Texas Governor Greg Abbott has also taken up the cause of blockchain and cryptocurrencies and wants to make the Lone Star State the next crypto magnet.
In June, Abbott signed a law that simplifies crypto investments in the state to attract more crypto companies and investors to the country. With success, as the increasing number of Bitcoin farms in the state shows. On the other hand, Chinese companies, in particular, are more distrusted in the US, which should not be underestimated as a political risk, according to Kevin Desouza from the Queensland University of Technology, as he revealed to BBC.
Incidentally, it is not only Bitcoin companies that can benefit from the conditions in Texas. For Texas oil and gas companies, in particular, a win-win situation is opening up. Oil producers often have the problem that when they open up new oil wells, they inadvertently come across natural gas deposits, but then they don’t know what to do with the escaping gas. Unlike oil, which can be transported by lorry, natural gas needs to be transported by pipeline. However, it is not worthwhile to build a pipeline for every type of leaking natural gas, so oil companies are often forced to fire the leaking gas to get rid of it.
However, companies, such as Upstream Data, specialise in using such unforeseen deposits as a source of energy for mobile Bitcoin mining stations. For Bitcoin farms, this opens up another cheap source of electricity, while for energy companies, a problem turns into another source of income.
While it seems that Texas is emerging as the new Bitcoin El Dorado, it remains to be seen for how long this trend will last. As the highest elected official in Dickens County, Texas, put it to The Guardian: “We’re seeing movement right now, we see a lot of interest. We understand why there is interest. But we just don’t know what the future of Bitcoin mining is. I think that is the biggest concern right now. How long is this industry going to be able to sustain itself.”