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China, Brazil and the US
Bitcoin mining has always been a fascinating topic for me. It’s the ultimate connection of the digital world (crypto) and the physical world through large mining facilities.
If you believe BTC to be obsolete and Proof-of-Work to be entirely wasteful, it’s understandable that you’re not a fan of bitcoin mining.
I tend to strongly disagree.
I believe PoW is a necessary condition to BTC, and BTC is a necessary condition to the existence of the whole crypto experiment. At least for the foreseeable future.
So I like to understand what’s going on in that side of the market. Two big news over the last few weeks caught my attention. One global, one local from my home country, Brazil.
Zero import taxes for miners in Brazil
Brazil exempted import taxes on mining equipment. That opens the possibility for the country to finally create large, industrial scale facilities.
Electricity cost in Brazil still remains high, but there’s a lot of waste on the path from the power plant to the final consumer (roughly 15%).
Bitcoin mining could present an opportunity to monetize the plants in a more efficient way.
The Rise of China (again)
An uptick of hashrate in China over the last few months is taking place. This is happening despite the government-mandated ban of mining in China that forced many miners out of the country and consolidated the US as the leader in Bitcoin mining.
The University of Cambridge new mining map data, spanning the period from September 2021 to January 2022, shows that the US has remained at the forefront of Bitcoin mining and extended its leading position (37.84%).
But China has re-emerged as a major mining hub (21.11%), followed by Kazakhstan (13.22%), Canada (6.48%), and Russia (4.66%).
I still remember when Chinese dominance in mining was taken as a given. While it’s healthy to see the pendulum move from East to West here, it will be critical to understand how the hashrate was able to grow in China after the ban.
The implications of that and miner behavior in a bear market will be important to follow over the next months. Some US operations are already booking losses and planning slower expansions due to the market downturn.
See you tomorrow.