The price drop of bitcoin has hurt the crypto mining business. Major mining farms in countries like China are forced to shut down, simply because it’s not profitable right now to operate such a facility. The costs of such a facility are rent, hardware, cooling, a bit of manpower and lots of electricity. It’s no wonder that countries with cheap electricity are interesting for mining companies.
Let’s take the upcoming Antminer S15 from Bitmain as our benchmark. This mining machine has 27 TH/s hash power and requires 1596 Watt. It produces 0.0012 BTC per day. That means it requires 833 full days to mine one whole bitcoin. Let’s say rent, cooling and manpower are $50 per mining machine per year (very little, I know). Currently one bitcoin costs $3418. That means electricity costs should be less than $3367 per year.
When electricity costs are $0.10 per KWh, you’d make a profit of $0.40 per day. That’s just $146 per year, minus the $50 rent and salary, leaves you less $96 per Antminer S15 mining machine. At 11 cents your profit would be one cent, and at 12 cents you’re making a loss.
But when you have alternative resources for electricity (solar power for example), it’s likely you can cut your costs considerably. At 9 cents you’re making $231 profit per machine, and 423 dollar at 8 cents per machine. Just that one cent makes a tremendous difference on a year long mining production.
Keep in mind, we haven’t even been talking about the money you need to pay to buy the machine ($1200) and the ship it (probably another $100). Add that to the equation and let’s say you want to write off the mining machine within a year. That means electricity costs need to be around $0.015 per KWh to break even at the current coin value and mining difficulty.
Therefore it’s interesting for investors to see which countries have the cheapest electricity and which countries support crypto businesses with tax reliefs, for example. Below you’ll find a list with countries that offer cheap electricity:
- United States ($0.12 / KWh)
- Iran, ($0.01 / KWh)
- Ukraine ($0.026 ~ $0.108 / KWh)
- Kazakhstan ($0.048 ~ $0.082 / KWh)
- Saudi Arabia ($0.048 / KWh)
- Venezuela ($0.089 / KWh)
- Turkey ($0.0878 / KWh)
- China ($0.12 / KWh)
As it turns out, in China the price for electricity is currently at an all-time high. This falls together with the drop in value of the cryptocurrency market, and created a very harsh environment for the mining business. Low revenue and high costs don’t go well together when you’re operating a business.
The next crypto mining powerhouse is likely to be located in Russia or its neighboring countries, while the Middle East could also be an option. However, mining operations prefer cool environments in order to not damage their hardware. Cooling the air in a factory setting requires lots of electricity, and that comes on top of the actual mining. From that perspective a country like the Ukraine makes more sense than Iran.
But don’t think of countries like Iran like it’s always hot there. Boroujen is one of the coldest areas in the country, with 122 snow days per year. Temperatures go from -15 in December nights to 35 degrees on the July summer days. The average annual temperature is 11.9 degrees. Iran can therefore very well be an option too.
With many Chinese miners closing their shop, where will the next crypto revolution have the biggest impact? Obviously this is not only based on electricity pricing and the weather. Government regulations also play a major part in this. Setting up a mining business in Iran is currently a difficult task (but not undo-able), where Kazakhstan has embraced crypto much more by providing tax cuts and other benefits.
Also published on Medium.