US Bitcoin Mining Machines Seek New Life Abroad Amidst Halving

Will Older Bitcoin Mining Machines Find New Life Abroad?

As the Bitcoin blockchain undergoes its quadrennial halving, a wave of older mining machines is expected to be decommissioned in the US. With the reward for mining set to be slashed in late April, miners are scrambling to upgrade to more efficient technology to offset the impact.

The Economics of Halving

The halving event, scheduled for late April, will reduce the reward for miners by half, from 6.25 Bitcoin to 3.125 Bitcoin. This will make it more difficult for miners to turn a profit, especially those using older, less efficient machines.

Migration to Lower-Cost Regions

With electricity being the biggest expense for miners, companies are looking to lower their costs by relocating their older machines to regions with cheaper power. SunnySide Digital CEO Taras Kulyk notes that these machines can still generate decent profits in places like Ethiopia, Tanzania, Paraguay, and Uruguay.

The Exodus of S19 Series Machines

According to Ethan Vera of Luxor Technology, around 600,000 S19 series computers, which constitute the majority of machines currently in use, are being moved out of the US, primarily to Africa and South America.

Challenges for US-Based Miners

While some miners are opting to sell their older machines, others are choosing to relocate them to lower-cost regions. Nuo Xu, who operates two sites in Texas, is exploring locations in Ethiopia, Nigeria, and other countries for his 6,000 older computers.

The Role of Hosting Fees

For miners who don't have their own facilities, hosting fees play a significant role. Xu estimates that hosting fees in the US are around 7 cents per kilowatt hour, while in Ethiopia, they are closer to 5 cents. This difference can make a substantial impact on profitability.

Ethiopia's Rise as a Mining Hub

Ethiopia has emerged as a major player in the digital mining ecosystem, with its low electricity costs and increased power generation. SunnySide Digital is negotiating a deal to move between 20,000 and 40,000 rigs to the East African nation.

The Dilemma for Publicly Traded Miners

Publicly traded companies face challenges in relocating machines abroad due to risk-averse shareholders and concerns about transportation, breakage, and security. As a result, some companies, like Bit Digital, are opting to keep their older machines in storage, ready to be deployed when Bitcoin prices rise.

The Arms Race for Efficiency

Miners have been investing heavily in new hardware to prepare for the halving. Since February 2023, the 13 major public Bitcoin-mining companies have placed orders for more than $1 billion worth of machines. Five of the biggest miners have raised over $2.7 billion in the past two years, and have added an additional $840 million this year.