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China’s leadership in the Bitcoin mining industry will be challenged

Bitcoin mining in China versus the rest of the world: Where we are now and where to look in the near future….

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If you talk about Bitcoin (BTC) mining, you have to talk about China. China has become a giant in the Bitcoin mining ecosystem with major mines and pools, quick, cheap labor and a majority control of the world’s hashing power. So, should you go set up a mining operation there? Do the pros outweigh the cons? Is China actually a threat to the Bitcoin ecosystem? Let’s look at the state of Chinese mining.

Back to the basics

In the beginning of Bitcoin, you could simply mine from your laptop or set up a few miners in your home to run the hashing algorithm. But as more miners started turning on and the Bitcoin mining difficulty rose, higher levels of computing power and electricity was needed to solve the equations and reap the reward.

Only a finite amount of Bitcoin can be mined — 21 million tokens — so as time goes on, it will get harder and harder to mine them. Miners continue to need better and faster hardware, which requires more electricity. Today, mining operations are moving to large data centers where thousands of miners run day and night.

Related: How to mine Bitcoin: Everything you need to know

Why mention all of this? Because when mining at a large scale, electricity costs, labor costs, the speed of acquiring new hardware and sustainability come into play if generating profit is the goal — and China has the advantage in nearly all of these areas.

The state of mining in China

At the end of 2019, China produced nearly two-thirds of the world’s hashing power. Even though cryptocurrency usage and exchanges are reportedly banned in China and Bitcoin mining was once in danger of being shut down, the government took an about-face and is increasingly embracing the use of blockchain technology in its major industries — and allowing Bitcoin mining to grow.

Related: US Bitcoin holders worry about Chinese control of the mining network

Bitcoin mining in China is a growing industry because labor costs are cheap, turn-around time is incredibly quick, and lead time and production costs are much lower, since the country is a hub for global trade. Since much of the hardware used to mine Bitcoin is made in China, miners can very quickly be upgraded. If you want to set up a data center fast with low overhead and expenses, do it in China.

Low electricity costs in the form of hydropower are available as well. Because Bitcoin mining requires so much electricity between powering the miners and powering the fans to cool the miners, a data center needs to get electricity as cheaply as possible. Hydropower in the Sichuan province is reportedly as low as $0.02 per kWh during the rainy season, and the Chinese government is now encouraging mining in this province so operations can take advantage of the hydropower plants there.

Related: Sichuan rainy season to give Bitcoin hash rate a much needed jolt

But only some Chinese mining operations run on cleaner, cheaper hydropower. Most run instead on coal, which is a dirtier and more expensive option. Of the main power sources today, hydro is the cheapest, at around $0.01 to $0.02 per kWh, with wind being another cheap option at $0.025 cents per kwh. Gas and coal are the more expensive options, at $0.03 to $0.035 cents (plus transmission costs and taxes). So, while labor and materials may be cheap, coal usage makes mining operations unsustainable from both a cost perspective and environmental perspective. Factor in the political instability of setting up mining operations in China, and you may want to look elsewhere.

Can China stay on top?

Anyone wanting to set up scaled mining operations are increasingly seeking out locations in Nordic countries, Canada and the United States. While these locations may offer higher start-up expenses and maintenance costs, the availability of sustainable, cost-effective electricity is proving to be a big advantage. Additionally, these areas are more politically stable, so there is less threat that the government will one day decide to shut down all mining operations. In fact, Canada deemed mining operations as “essential services” during its COVID-19 pandemic shutdown.

Related: Regulatory overview of crypto mining in different countries

This may be the reason why the world’s hashing power is shifting locations. According to a recent report, Chinese hashing power is decreasing compared with last year yet growing in other parts of the world.

Another reason for this decrease may be that Chinese mining was hit hard in 2020. The COVID-19 pandemic disrupted supply chains, causing new hardware to be significantly delayed in getting to data centers. In an industry where every minute counts, using slower, older miners for even a day longer means losing money and advantage. Additionally, China’s quarantine rules prevented workers from tending to their rigs, further disrupting operations.

Additionally, the third Bitcoin halving occurred this past May, cutting the mining reward in half and forcing miners to make significant upgrades to their hardware to stay competitive. Because it now takes twice as much hashing power to mine the same amount of Bitcoin as a year ago, mining operations have needed to not only upgrade, but make sure their energy costs were staying efficient. Following the halving, many miners around the world switched off because the endeavor was no longer profitable.

On top of it all, this summer’s monsoon season caused excessive flooding in the Sichuan province, leading to electrical shortages that cut up to 20% of the region’s hash rate.

Despite these significant setbacks, mining in China is sure to bounce back. But with other parts of the world embracing and encouraging Bitcoin mining, and with the greater sustainability offered elsewhere, we may soon see China’s place as the giant of the industry challenged.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Philip Salter is the head of mining operations at Genesis Mining, the world’s largest cloud crypto mining operation, where he leads the software development, data engineering and research teams. Salter started his career as a software developer for BSI Business Systems Integration AG. Salter is an avid miner and crypto enthusiast based in Germany.

Source: https://cointelegraph.com/news/china-s-leadership-in-the-bitcoin-mining-industry-will-be-challenged

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Cointelegraph

Chainalysis raises $100M in Series E funding led by Coatue

Chainalysis secures its second $100 million investment round in three months.

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Chainalysis has secured hundreds of millions of dollars in the second quarter as venture firms allocate more resources to the emerging blockchain sector.

Chainalysis raises $100M in Series E funding led by Coatue

Blockchain analytics company Chainalysis has secured $100 million in Series E financing, bringing its total valuation to a staggering $4.2 billion and highlighting once again the tremendous growth of the cryptocurrency industry.

The round was led by global investment manager Coatue, with additional participation from 9Yards Capital, Altimeter, Blackstone, GIC, Pictet, Sequoia Heritage and SVB Capital, Chainalysis announced Thursday.

Chainalysis said the funds will go toward expanding its blockchain data capabilities, which includes investing in new data tools, software and APIs.

“We believe blockchain data is the asset that can help public and private sector organizations understand the risks and opportunities surrounding this asset class and promote its adoption safely and successfully,” the company said.

Chainalysis’ valuation has more than doubled in the last quarter thanks to several strategic investments. As Cointelegraph reported, the company closed out a $100 million Series D round in March led by Paradigm, a crypto-focused investment firm. At the time, Chainalysis’ director of communications Maddie Kennedy told Cointelegraph that the funds will be used to expand the company’s enterprise data offering.

Related: Crypto-finance company Amber Group valued at $1B following $100M raise

Mega-million-dollar funding rounds have become commonplace in the cryptocurrency industry over the last six months. Venture firms have poured billions into crypto startups this year alone, with the likes of Andreessen Horowitz going a step further by announcing a new $2.2 billion crypto venture fund.

What’s more, dealmaking seems to be happening irrespective of current market conditions, which marks an important evolution from the 2017 bull market that saw venture funding dry up once the initial coin offering mania faded.

Source: https://cointelegraph.com/news/chainalysis-raises-100m-in-series-e-funding-led-by-coatue

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Crypto miners eye cheap power in Texas, but fears aired over impact on the grid

Can Texas meet the electricity demands of migrating Chinese Bitcoin miners?

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The recent crackdown on crypto mining in China has seen concerns expressed over the potential impact a hashrate migration could have on Texas’ unreliable electricity market, as an increasing number of dislocated miners eye the Lone Star State.

Texas’ abundant sources of renewable energy and highly deregulated power grid make the state an obvious choice for migrating miners from China and elsewhere, with 20% of Texan electricity being generated by wind as of 2019.

Speaking to CNBC, Brandon Arvanaghi, a former security engineer at crypto exchange Gemini, predicted Texas will see “a dramatic shift over the next few months” as miners look to set up shop.

“We have governors like Greg Abbott in Texas who are promoting mining. It is going to become a real industry in the United States, which is going to be incredible,” he said, adding:

“Texas not only has the cheapest electricity in the U.S. but some of the cheapest in the globe.”

Castle Island Ventures’ founding partner, Nic Carter told CNBC that half of the world’s hashing power could ultimately exit China’s borders and will need new homes, stating:

“Every Western mining host I know has had their phones ringing off the hook. Chinese miners or miners that were domiciled in China are looking to Central Asia, Eastern Europe, the U.S., and Northern Europe.”

Global hash rate has fallen by one-third since early May following reports that China’s mining industry would be subjected to stricter supervision.

But is the Texan power grid up to the challenge of providing power for an influx of more crypto miners? The Electric Reliability Council of Texas (ERCOT) has just requested that Texans curb their electricity usage amid the recent heatwave that saw many residents turning up their air conditioners earlier this week.

Roughly 12,000 megawatts of generation capacity was offline as of Monday — enough to power 2.5 million homes. ERCOT described the scale of forced outages as “very concerning.”

The regulator warned that a failure to heed the request could result in a repeat of the widespread winter power failures that left 69% of Texans without electricity, and roughly half without water in February. According to Buzzfeed, February’s outages could have resulted in up to 700 deaths in the state.

Angela Walch, a Texas research associate at University College London’s Centre for Blockchain Technologies, tweeted her concerns regarding the share of Texas’ electricity being devoted to Bitcoin mining, emphasizing that her family has been “asked to reduce our air conditioning use, not run washing machines & dryers, etc.”

Obviously, Bitcoin is not the sole cause of this cluster*^% that our poor political leadership in Texas has caused.

But, I am curious to know the portion of the grid it uses. Maybe Bitcoin miners are the first to be shut down in times of grid stress.

— Angela Walch (@angela_walch) June 15, 2021

However Tierion CEO Wayne Vaughan responded by asserting that much of the electricity used to power Texan mining operations comprised stranded resources that “would never be able to reach your home to power your appliances.”

Others argued that wholesale Bitcoin mining operations could actually alleviate Texas’ power issues, with Texas’ seasonal surges in electricity demand incentivizing miners to sell power back to the state’s grid that otherwise go uncaptured.

In September 2020, the Peter Thiel-backed crypto miner Layer1 in West Texas reported it had reaped profits exceeding 700% by selling renewable electricity back to the grid amid surging summer demand.

While up-to-date data for global hashrate distribution is not available, the Cambridge University’s Bitcoin Electricity Consumption Index (BECI) estimates that China represented 65% of the world’s hashing power as of April 2020.

Earlier this month, district regulators in Western Xinjiang and Yunnan issued notices mandating the suspension of virtual currency mining enterprises. BECI estimates the two regions account for 40% of the country’s hash rate.

Castle Island Ventures’ founding partner, Nic Carter told CNBC that half of the world’s hashing power could ultimately exit China’s borders and will need new homes, stating:

Source: https://cointelegraph.com/news/crypto-miners-eye-cheap-power-in-texas-but-fears-aired-over-impact-on-the-grid

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Bitcoin price hits $40K as Paul Tudor Jones slams Fed inflation claims

Bitcoin price action is back at $40,000 as Paul Tudor Jones recommends a 5% BTC portfolio.

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Bitcoin (BTC) passed $40,000 on June 14 as a consolidation period snapped to unleash a solid breakout.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingViewBTC price breaks out past $40,000

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD gaining 3% in under an hour, reaching $40,500 on Bitstamp.

The largest cryptocurrency capitalized on upside which resulted from a new positive tweet from Elon Musk over possible acceptance by Tesla in the future.

Earlier, Cointelegraph reported on traders betting on a leg up to around $47,000 before a correction.

A look at buy and sell positions on major exchange Binance showed support at $38,000, wit resistance at $40,500 the next hurdle for bulls.

Buy and sell levels on Binance as of June 14. Source: Material Indicators/TwitterTudor Jones advocates 5% BTC allocation

Bitcoin reached a $2 trillion market cap because of a “dichotomy” in Federal Reserve policy which “questions” its credibility, says famous trader Paul Tudor Jones.

In an interview with CNBC on June 14, the founder of Tudor Investment Corporation sounded the alarm over advancing inflation.

After last week’s consumer price index (CPI) report showed that U.S. inflation had hit a 13-year high, Bitcoin’s deflationary nature has rarely looked so appealing.

For Tudor Jones, the idea that higher inflation is just temporary due to recent events, as suggested by the Fed and central banks in general, is a myth.

“It’s somewhat disingenuous to say, for them to say, that inflation is transitory,” he told CNBC’s Squawk Box segment.

Today’s environment is entirely different to that which saw episodes of inflation in the past, such as 2013, and as such, there is little sense in the Fed applying the same forecasts.

CPI was much lower then, Tudor Jones noted, while now, unemployment and jobs also roughly equal each other.

Related: Paul Tudor Jones says Bitcoin is ‘like investing early in Apple or Google’

Meanwhile, gold and Bitcoin have provided a refuge for many. Despite the precious metal vastly underperforming Bitcoin in terms of gains, it remains near record highs.

“When you look at the Fed today and the Fed back then, you wonder how can you have such wildly different policy views on what constitutes the right levels for employment, the right levels for inflation,” he continued.

“How can you have that with an eight-year timeframe? It’s almost like a split personality and you wonder why Bitcoin has a $2 trillion market cap and gold’s at $1,865 an ounce. And the reason why is you have this dichotomy in policy that again questions — questions — the institutional credibility of something.”

Ultimately, a 5% Bitcoin allocation is one of the only things he advocates to those seeking portfolio advice.

“I say, ‘OK, listen, the only thing I know for certain is I want to have 5% in gold, 5% in Bitcoin, 5% in cash, 5% in commodities at this point in time,'” he added.

A look at buy and sell positions on major exchange Binance showed support at $38,000, wit resistance at $40,500 the next hurdle for bulls.

Source: https://cointelegraph.com/news/bitcoin-price-hits-40k-as-paul-tudor-jones-slams-fed-inflation-claims

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