The effects and damage of wars are almost always extrapolated to those who have the least to do with those conflicts. In the case of the current war escalation between Russia and Ukraine, Western countries receive collateral damage. An example is the United States, where the price of gasoline has increased as a result of the increase in the cost of a barrel of oil. What is alarming is that electrical energy could also suffer the same effect, which would be detrimental to Bitcoin (BTC) mining.
But what is it due to? To explain it, it is first good to make several clarifications that will help understand why a war that is being waged 9,181 kilometers away could affect Bitcoin mining in North America.
The United States, although it is an oil producing country, it is also a large importer of oil. In general, this raw material is subject to rises and falls in its price as a result of the basic principle of economics and trade: supply and demand.
Russia is the ninth country that exports the most crude oil to the US, which sent just over 90,000 barrels a day to that country in December, and one of the main – if not the largest – sellers of oil to European countries. These nations, for the most part, rejected the actions of President Vladimir Putin and his invasion of Ukraine and therefore decided not to continue buying oil from the Eurasian nation. The United States did the same thing, which a few days ago banned the import of fossil fuels labeled ‘Made in Russia’.
This led to a large demand for oil falling on the Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia, which severely increased the price of crude oil sold by this association. It is estimated, at the closing of this note, about USD 120 per barrel of OPEC oil on average.
The United States, which is not a member of OPEC, does buy millions and millions of barrels of oil from the organization. For this reason, the North American country, due to the war and for not using its oil reserves, it is necessary to invest more to acquire the “black gold” which, among other things, basically supplies the entire North American national industry.
Evidently, the higher the investment, the higher the price of gasoline, the oil by-product that is processed in the large refineries in the southern United States and which is then taken through pipelines to the more than 50 states that make up that nation. Just to exemplify, in California, in the eastern United States, maximums of USD 5.44 have been reached for only 3 liters of gasoline.
But beyond gasoline, American electricity is produced, mostly, by fossil sources. Yes, like oil. Natural gas, coal and other polluting organisms from the environment also enter.
In that country, there are thermal plants responsible for processing oil and in them there are steam turbines that convert thermal energy -produced by the combustion of crude oil- into mechanical energy, which then acts as a kind of electric generator.
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For this, local oil is usually used, but imported oil also plays an important role, knowing that, per day, more than 22 million barrels of crude oil are consumed in the United States.
Therefore, and in addition to the increase in the price of gasolinecould see an increase in the price of electricity that is consumed in the United States as a result of the war. Oil, which is traded in a global commodity market environment, would play a major role if the cost of living in the US rose.
A plausible affectation to Bitcoin mining
Here comes the impact on Bitcoin mining. It happens that the United States currently leads the global hashrate. houses the 35% of computing power to process the Bitcoin network, a number reached as a result of the migration of miners who escaped from China.
That hashrate is due to hundreds of Bitcoin mining farms in different US states, which have benefited in recent months in terms of competitiveness and supply of equipment and spare parts, for example.
But those farms, at least for the most part, They rely on the energy that is distributed in the state electricity networks and that, in general, are sustained by energy production with fossil fuels, which we talked about above.
What does it mean? That, if oil continues to rise due to the war and reaches extremely high levels, an increase in the price of energy is plausible that would make production expensive on Bitcoin mining farms that do not opt for renewable energy and, on the contrary, they keep operating with the electricity that can be produced with crude oil.
Many farms depend on energy produced from oil
CriptoNoticias located the data of several mining farms of different companies. Of these, only two are supplied with renewable energy. The rest uses the electrical networks to supply and operate.
In the case of Riot Blockchain, which is one of the largest mining companies in the United States, its Whinstone farm in Rockdale, Texas, has an energy capacity of 750 MW, which is supplied by the state grid. This is especially relevant, because this mining plant is one of the most important in the world due to its enormous capacity.
Core Scientific, meanwhile, has farms in the midwestern and southern United States, and its 150 MW of electrical capacity is also sourced from the state grid, paying an average of $0.085 per kWh. The same goes for BoxMiner, an Ohio-based company that has a capacity of 6 MW and pays USD 0.06 per kWh.
If we talk about Blockware Solutions, this company with farms in Kentucky and Pennsylvania is supplied by the state power grid and has a capacity of 65 MW. To operate, you need to pay just USD 0.069 kWh.
Although prices are slightly higher compared to other countries, such as Venezuela, where up to USD 0.010 per kWh is paid, mining activity in the United States has expanded notably due to the benefits it offers to those who want to dedicate themselves to mining Bitcoin.
For this reason, and in the face of a metaphorical increase in the cost of electricity, these companies mentioned (in addition to the others that depend on the electricity grid) could see the maintenance of their operations a bit uphill, even when in the United States mining could not be subject to taxes and levies.
Renewable energy, the solution?
In the United States, there are companies like Cleanspark that, through nuclear, wind, solar and hydroelectric energy, supply their farms in the state of New York and Georgia, which allows them to keep the generation of bitcoins in constant operation.
Another similar one is Scate Ventures, based in the state of Washington, in the Northwest of the USA. This farm is supplied by hydroelectric energy and has a total capacity of 12 MW to operate. You have to pay about USD 0.0725 per kWh.
The renewable sources used by these companies give them enough energy capacity to keep operating, without fearing a rebound in the price of crude oil. This is important, especially considering that there is, so far, no sign that the war raging in eastern Europe is about to end.
And beyond the war, it is interesting that these companies cover themselves from a possible increase in electricity, knowing that there are ongoing talks between China and the Arab countries, it is rare that crude oil begins to be negotiated with the Chinese renminbi or yuan, due to to the loss of the dollar as an international exchange currency.
Seeing this, perhaps that is the destiny of US mining companies: to use renewable energy. This would be positive from two points of view. The first is that the dependence on a non-renewable source to continue mining would be eliminated. The second is that it would contribute to the narrative that Bitcoin mining does not necessarily have to pollute the environment.
The final question is: will mining companies intend to migrate to another energy source? Time and the course of events will answer it.