Massive Flight of Bitcoin Mining Rigs from US Driven by Halving

Surplus Bitcoin mining machines in the US are being relocated to lower-cost regions abroad due to the halving event in late April. As the halving reduces the mining reward, older machines become less profitable in the US, prompting miners to upgrade to more efficient models. Buyers seek these older machines for use in regions with cheaper electricity, including Africa and South America, where they can still generate profits. While some miners sell their hardware, others opt to transfer it to lower-cost locations with third-party data centers to minimize electricity expenses and extend machine lifespan.

Mass Exodus of Bitcoin Mining Machines from the US: Halving Triggers Global Migration

May 2024

Approximately 6,000 obsolete Bitcoin (BTC) mining machines are poised to be decommissioned in the United States and shipped to a 35,000-square-foot facility in Colorado Springs, where they will undergo refurbishment before being resold to international buyers seeking to capitalize on lower-cost mining environments.

The Halving's Impact

This impending relocation signifies a broader trend driven by the upcoming Bitcoin halving, an event scheduled for late April that will witness a 50% reduction in the mining reward. This halving, occurring every four years, is designed to maintain the digital asset's supply cap at 21 million BTC.

In response to the halving's anticipated impact on revenue, miners are scrambling to upgrade their equipment to the most efficient and advanced models. The influx of outdated machines from the US is a testament to the economic imperatives shaping the industry.

Global Migration

According to estimates from Luxor Technology, a Seattle-based provider of crypto-mining services, approximately 600,000 S19 series machines, representing a significant portion of current mining infrastructure, are being exported from the US, predominantly to Africa and South America.

Taras Kulyk, CEO of SunnySide Digital, which operates the Colorado Springs facility, attributes this migration to the significantly lower electricity costs in these regions. "It's a natural shift for buyers to seek out areas where power is cheaper," he explains.

Seeking Profitability

While S19 series machines may cease to be economically viable in the US after the halving, they "can still generate decent profits and extend their lifespan if hosted" in countries with lower electricity costs, asserts Jaran Mellerud, CEO of Dubai-based Hashlabs Mining.

Price Decline

Anticipating a price drop for used mining equipment post-halving, some buyers are postponing purchases. Luxor's trading desk for used machines reports that the price of used S19 models has plunged from $7,030 in March 2022 to an estimated $356 in May 2024.

Relocation Considerations

Despite the lower energy costs, not all US-based miners are willing to relocate their hardware. Publicly traded companies face heightened risk aversion from shareholders, while transportation costs, breakage, and security concerns present additional obstacles.

However, miners with their own facilities are actively seeking out locations with favorable electricity rates. Nuo Xu, who operates two sites in Texas, is exploring options in Ethiopia, Nigeria, and elsewhere to house approximately 6,000 older machines.

Hosting Fees and Electricity Costs

Hosting fees for miners lacking their own facilities typically include electricity, labor, and third-party operators. Estimates suggest that these fees average around 7 cents per kilowatt hour (kWh) in the US, while in Ethiopia, where crypto mining regulations have been relaxed and power generation has increased, the rate is closer to 5 cents per kWh.

The substantial difference in hosting fees and the lower electricity costs in countries like Ethiopia have made them attractive destinations for miners.

Big Investments and Funding

Major public Bitcoin mining companies have been investing heavily in new hardware to prepare for the halving. TheMinerMag, a crypto-mining research firm, estimates that 13 leading companies have placed orders for over $1 billion worth of machines since February 2023.

Five of the largest miners have raised more than $2.7 billion through share sales in the two years leading up to December 2023, with an additional $840 million secured since the start of 2024.