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CNBC’s MacKenzie Sigalos joins Worldwide Exchange to break down new data showing that the U.S. is now the number one destination for bitcoin miners, eclipsing China for the first time ever. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
The U.S. is now the number one destination for bitcoin miners, eclipsing China for the first time ever. While it was already trending in that direction, new data from Cambridge University released early Wednesday makes it official.
As of July, 35.4% of bitcoin’s hashrate – an industry term used to describe the collective computing power of miners – is in the United States, according to the Cambridge Centre for Alternative Finance. That’s a 428% increase from September 2020.
America partly has China to thank for its newfound dominance in the mining industry.
Twelve months ago, China was the market leader in terms of hashrate – by a long shot. But Beijing’s crypto crackdown in the spring took half the world’s bitcoin miners offline practically overnight.
Miners started fleeing China en masse, heading to the cheapest energy sources on the planet in what was dubbed “the great mining migration.” A whole lot of them ended up in America.
The newly-released Cambridge data zeroes out China’s average monthly share of the global hashrate in July – a major reversal from September 2020, when China captured about 67% of the market.
“The whole narrative of China controls bitcoin is now completely destroyed,” said Boaz Sobrado, a London-based fintech data analyst.
Heading to America
The U.S. ticks a lot of boxes for migrant bitcoin miners searching for a new home.
For one, states like Texas boast some of the world’s lowest energy prices, which is a major incentive to miners who compete in a low-margin industry, where their only variable cost is typically energy.
The U.S. is also flush with renewable power sources.
Washington state is a mecca for hydropowered mining farms. New York produces more hydroelectric power than any other state east of the Rocky Mountains, and it counts its nuclear power plants toward its 100% carbon-free electricity goal. Meanwhile, Texas’ share of renewables is growing over time, with 20% of its power coming from wind as of 2019. The Texas grid also continues to rapidly add more wind and solar power.
Miners across the country have also harnessed nuclear power. Some are latching their rigs to otherwise stranded energy, like natural gas going to waste in oil fields across Texas. This reduces greenhouse gas emissions and generates money for the gas providers and miners.
This shift toward zero-emission, clean energy sources has already begun to recast the narrative among skeptics that bitcoin is bad for the environment.
“Mining is price sensitive, so as to seek out the lowest-cost power and the lowest-cost power tends to be renewable because if you’re burning fossil fuels … it has extraction, refinement and transport costs,” Blockstream CEO Adam Back said.
Besides lower electricity costs, some U.S. states like Texas also have crypto-friendly policymakers and an adequate supply of hosting infrastructure.
The state has a deregulated power grid with real-time spot pricing that lets customers choose between power providers, and crucially, its political leaders are pro-crypto. Those are dream conditions for miners who want a kind welcome and cheap energy sources.
“If you’re looking to relocate hundreds of millions of dollars of miners out of China, you want to make sure you have geographic, political, and jurisdictional stability. You also want to make sure there are private property rights protections for the assets that you are relocating,” said Darin Feinstein, co-founder of Core Scientific.
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