The Bitcoin “halving” event is driving the relocation of outdated US mining computers overseas.
The process of ‘mining’ new bitcoins requires a lot of computational power and needs energy. Image credit: BenjaminNelan via Pixabay, free license
In Bitcoin mining, specialized machines are utilized to validate transactions on the blockchain and earn operators fixed token rewards. Approximately 6,000 older Bitcoin mining machines in the US are slated to be decommissioned and transported to a warehouse in Colorado Springs. There, they will undergo refurbishment and be sold to buyers abroad seeking to capitalize on mining opportunities in more cost-effective environments.
These machines, among several hundred thousand expected, are being refurbished in anticipation of a significant quadrennial update in the Bitcoin blockchain, known as the halving event. Scheduled for late April, this event will reduce the reward that serves as the primary revenue source for miners. To mitigate the impact, miners are upgrading to the latest and most efficient technology.
Given that electricity constitutes the largest expense in mining operations, companies are compelled to seek lower-cost alternatives to maintain profitability. While older computers may still yield profits, they are unlikely to do so within the US market. Experts note that this trend represents a natural migration, with buyers of older machines situated in regions where power costs are minimal.
The concept of halving, integrated by the anonymous Bitcoin creator Satoshi Nakamoto, occurs once every four years to uphold the hard cap of 21 million tokens. The upcoming halving event, the fourth since 2012, will reduce the reward from 6.25 Bitcoin to 3.125 Bitcoin. Despite Bitcoin’s remarkable 50% surge this year to approximately $63,500, the impending halving has heightened the urgency to bring more efficient machines online.
As the halving approaches, the continued use of older equipment poses a risk of electricity costs surpassing mining revenue. While models like the S19 series may no longer be profitable to operate in the US post-halving, they can still yield substantial profits and enjoy an extended operational lifespan when hosted in regions such as Africa.
Some buyers are delaying their purchase of older computers until after the halving event, anticipating further price drops. For example, the cost of used S19 models was approximately $7,030 in March 2022. However, a year later, amidst declining Bitcoin prices, the price plummeted to about $900, further decreasing to approximately $427 this month. The price is projected to drop to around $356 in May, following the halving event.
In response to these price fluctuations, some miners in the US have opted not to sell their hardware but instead, plan to relocate the equipment to regions with lower electricity costs and third-party data centers.
However, not all mining equipment from the US is relocated abroad. Publicly traded companies face challenges in this regard due to the need to consider risk-averse shareholders and concerns regarding transportation costs, equipment breakage, and security.
These machines remain inactive for extended periods, collecting dust, yet companies retain them because they can still yield profits when Bitcoin prices surge, underscoring the cyclical nature of profitability in the mining industry.
Written by Alius Noreika