Global Digital Mining Trends

At present, China’s mining scale accounts for 65% of the world’s total, while the remaining 35% is distributed from North America, Europe, and the rest of the world.

On the whole, North America has gradually begun to support digital asset mining and guide funds and institutions with professional operation and risk control capabilities to enter the market; Stable political situation, low electricity charges, reasonable legal framework, relatively mature financial market, and climate conditions are the main factors for the development of cryptocurrency mining.

USA: Missoula County Committee of Montana has added green regulations for digital asset mining. The regulations require that miners can only be arranged in light and heavy industrial areas. After review and approval, the mining rights of the miners can be extended to April 3, 2021.

Canada: Continues to take measures to support the development of digital asset mining business in Canada. Quebec Hydro has agreed to reserve one-fifth of its electricity (about 300 megawatts) for miners.

China: The advent of the annual flood season in the Sichuan province in China ushered in a period of significantly lower electricity costs for mining hardware, which can accelerate more mining taking place. As the flood season reduces costs and increases profits, it is expected to see a reduction of Bitcoin liquidation, which would also stimulate the rise in currency prices.


Margin compression

As the hashrate and difficulty increases, miners will have to try harder to remain profitable, as long as there are no dramatic fluctuations in the price of bitcoin.

“If our top end scenario of 300 EH/s comes to pass, the effective doubling of the global hashrates would mean that mining rewards will be cut in half,” Gryphon’s Chang said.

As competition eats away at the high margins of the miners, companies that can keep their costs low and are able to operate with efficient machines will be the one that will survive and have a chance at thriving.

“Miners with low costs and efficient machines will be best positioned while those operating older machines will feel the pinch more than others,” Chang added.

New miners will be especially affected by smaller margins . Power and infrastructure are among the key cost considerations for miners. New entrants have a harder time securing cheap access to these, due to a lack of connections and increased competition over resources.

“We anticipate that the inexperienced players will be the ones to experience lower margins,” said Danni Zheng, vice president of crypto miner BIT Mining, citing costs like electricity and data center construction and maintenance.

Miners like Argo Blockchain will strive for ultra-efficiency while growing their operations. Given increased competition, “we have to be smarter about how we grow,” said Argo Blockchain’s CEO Peter Wall.

“I do think that we’re in this kind of super cycle that is different from previous cycles but we still have to keep our eye on the prize, which is being very efficient and having access to low-cost power,’’ Wall added.

Rise in M&A

As winners and losers emerge from the hashrate wars, larger, more capitalized companies will likely gobble up smaller miners who struggle to keep pace.

Marathon’s Thiel expects such consolidation to pick up in the middle of 2022 and beyond. He also expects his company Marathon, which is well capitalized , to grow aggressively next year. This could mean acquiring smaller players or continuing to invest in its own hashrate.

Hut 8 Mining, which  is ready to follow the same playbook. “We’re cashed up and we’re ready to go, regardless of which way the market turns next year,” said Sue Ennis, head of investor relations for the Canadian miner.

Other than large miners, it’s also possible that big entities, such as power companies and data centers, may want to join the buying spree, if the industry becomes more competitive, and miners face the margin crunch, according to Argo’s Wall.

Several such traditional companies have already entered the mining game in Asia, including Singapore-based real estate developer Hatten Land and Thai data center operator Jasmine Telekom Systems. Malaysian miner Hashtrex’s Gobi Nathan told CoinDesk that “corporations around Southeast Asia are looking to set up large-scale facilities in Malaysia next year.”

Similarly, Europe-based Denis Rusinovich, co-founder of Cryptocurrency Mining Group and Maverick Group, sees a trend for cross-sector investments in mining in Europe and Russia. Companies are seeing that bitcoin mining can subsidize other parts of their business and improve their overall bottom line, Rusinovich said.

In Russia, the trend is apparent with energy producers, whereas in continental Europe, there tend to be small mines that integrate waste management with mining or take advantage of small bits of stranded energy, he added.

Cheap power and ESG

Access to cheap power has always been one of the main pillars of a profitable mining business. But as the criticism around mining’s impact on the environment has grown, it is all the more important to secure renewable sources of energy to stay competitive.


As mining becomes more competitive, “energy-saving solutions would be a game-determining factor,” said Arthur Lee, founder and CEO of Saitech, an Eurasia-based, clean-energy driven digital asset mining operator.

“The future of crypto mining would be empowered and sustained by clean energy, which is the shortcut towards carbon neutrality and a key to alleviating worldwide electricity shortage whilst improving miners’ return on investment,” Lee added.

In addition, there are likely going to be more energy efficient miners, such as Bitmain’s latest Antminer S19 XP, that will also come into play, which will make the businesses run more efficiently and have less impact on the environment.


Fast money versus value investors

One of the main reasons many new players are flocking to the crypto mining sector is due to its high margins as well as support from the capital markets. The mining sector saw a slew of IPOs and new funding from institutional investors this year. As the industry becomes more mature, the trend is expected to continue in 2022.Currently investors are using miners as a proxy investment for bitcoin. But as institutions are becoming more experienced, they will change how they invest in mining, according to Gryphon’s Chang. “We are noticing that they are focusing more on the things institutional investors traditionally place a lot of emphasis on, which are namely: quality management, experienced execution and companies that act like blue chip organizations [established companies] as opposed to stock promoters,” he said.


New technologies in mining

As efficient mining becomes a more important tool in order for miners to stay ahead of the competition, companies will increase their focus on not just better mining computers but new innovative technologies to maximize their overall profit. Currently the miners are leaning toward using technology such as immersion cooling to boost the performance and lower the cost of mining without having to buy additional computers.

“Aside from reducing power consumption and noise pollution, the immersion liquid-cooled miner occupies significantly less space, with neither pressure fans, water curtains nor water-cooled fans needed to achieve a better heat dissipation effect,” Canaan’s Lu said.

Post time: Mar-02-2022