As the halving of Bitcoin approaches Miners around the world were forced to make adjustments. Halving doubles Bitcoin (BTC) production costs overnightFortunately, the cryptocurrency has responded positively to the next event.
While almost everyone in the crypto space is optimistic about the event, and for good reason, The way the Bitcoin price follows after halving is unknown, especially given the coronavirus pandemic and the massive wave of unemployment that goes with it. While it can be a stressful event for Bitcoin holders, This is all the more true for those who were responsible for producing Bitcoin: the miners.
For Bitcoin miners in countries with subsidized electricity such as Venezuela or low electricity prices like China, where most of the hash energy is in the Bitcoin network, an increase in production costs can be manageable. Even those with medium prices but equipped with the latest mining equipment are ready. But for those with the highest level of electricity found in Europe, Your trades can depend heavily on Bitcoin’s price action after halving.
European miners are preparing to cut in half
That’s how the miners come Europe, where electricity prices are among the highest in the worldwere prepared for halving.
While some may be forced to close if the price doesn’t go their way, miners have long been aware of the halving and have been able to prepare for the event. According to Jake Stott, founding member of dGen, a Berlin-based think tank that recently interviewed many key European players in the industry, miners have had the opportunity to update:
“The best thing about halving Bitcoin is that it’s a known sales shock. Miners will have been preparing for this day since the last halving years ago. Upgrading to the latest machines, newer infrastructure, providing cheaper power sources and bundling with the right group are crucial. Miners are well prepared for all Bitcoin price scenarios. “
While it is important to have the most modern equipment and infrastructure, this will not be enough. Youssef El Manssouri, co-founder and CEO of Sesterce, a French company that provides mining services, said to Cointelegraph:
“It is very difficult to predict what will happen after halving. It seems most logical to prepare for the worst case scenario when trying to negotiate electrical contracts and renew the machine fleet. We do this a few months in advance in Sesterce. “
Equipment expansions and low-cost power supply through partnerships are the first steps for miners in Europe, but there are other solutions that can prepare them for the volatility that can persist after halving. including hedging strategies and credit accumulation. According to Antoni Trenchev, co-founder of cryptocurrency lender Nexo, this is already happening in the region. He said to Cointelegraph:
“There is a growing variety of financial instruments for digital asset management and therefore a range of services that are specifically tailored to the needs of miners. Notable examples of this are miners who guarantee an average sale price in the future or insure yourself against hash rate changes through upcoming hashrate derivatives. Miners make up a significant portion of Nexo’s customer base, and many of them choose our standard cryptocurrency-based line of credit to maintain and operate. Expand your operations or use newly issued BTCs. “
The future of mining in Europe
Although Europe’s miners are doing their best to manage the halving, the event questions the long-term profitability of mining. Can activity be maintained in Europe? Is co-location becoming the norm? Or can companies and governments in the region start to compete with other countries where mining becomes a full-fledged industry? Manssouri believes that Europe can be competitive:
“We are seeing more and more European countries understand mining and the underlying sovereignty problems. We have large power plants in Europe that have many losses and lost revenue, and it is up to us to make up for these losses in the mining and energy sectors Europe can do well in the long term. “
The use of excess energy and renewable energies could be the answer for the European mining industry, and this is already happening, according to Whit Gibbs, host of the mining-based podcast Hashr8. But there can also be an answer in other forms of mining than Bitcoin. Gibbs said to Cointelegraph:
“Although parts of Europe don’t get as much attention today, they’re still great for mining. Iceland and Sweden seem to be the most popular locations. I have heard that there are German energy producers that start to explode with their excess energy, just like the US producers. Interestingly, some of them don’t just mine Bitcoin, but rather equip GPU and FPGA devices to take advantage of more speculative mining games. “
There are other benefits that go well beyond the cost and quality of electricity. When it comes to a young industry like cryptocurrency mining, Regulation is a crucial factor. A ban on crypto mining can get miners out of business in no timeThe government’s perspective on mining and cryptocurrencies in general is therefore very important. According to Gibbs, “Europe is much more receptive to Bitcoin and cryptocurrencies than other places where energy is cheaper and this can be a critical factor.”
Indeed, regulation and political stability were the main strengths mentioned by miners and other industry players, about which Cointelegraph also spoke in the region. Some believe that this factor is so important that it can even make Europe one of the most attractive places for miners, as Stott told Cointelegraph:
“I would say that Europe is one of the most viable long-term mining markets. Political stability is the key to this industry, and as more and more money is invested in space, many will try to locate their mines in Europe.”
Political stability and a generally positive outlook on cryptocurrencies are excellent, but somehow worthless if they do not lead to tangible benefits for miners. Luckily for those looking to mine in Europe, initiatives like Portugal’s tax exemptions for cryptocurrency issuers are beginning to emerge. Stott added:
“It is clear that this type of initiative can only encourage people in this direction. Portugal seems to be pursuing a more innovation-oriented policy lately, and we can only congratulate them on it, but to be a really competitive choice in the eyes of large mining infrastructures, it will be important to offer multi-megawatt contracts at prices like that are competitive like in Texas or China. “
Put the parts together
So from the alternative power supply to government incentives, Europe has many positive factors that can easily be overlookedThis means that miners should be able to survive a bearish bitcoin after being cut in half. However, the problem of electricity costs remains a fundamental obstacle. Gibbs also noted that high prices don’t just apply to electricity:
“According to sources, Europe is still an expensive mining location in most places. While there are many options, it is difficult to find cheap and sustainable energy. There is no widespread overproduction in the US, CIS and China. The price of the computer is also very high, especially for GPUs. “
While the most obvious answer for miners is in countries like China or Russia, where electricity is cheaper, other alternatives are becoming more attractive. As Matt D’Souza, CEO of the US-based mining company Blockware Solutions, told Cointelegraph, this is the case in the US. The United States, which has struck a perfect balance between low to medium electricity prices and political and regulatory stability, added:
“The United States has excellent stability and redundancy. Switzerland had a drought in 2017/2018 and the hydropower rates did not increase sustainably for one of my large customers. The government believes that cheaper energy areas are more unstable and less secure. The United States is confident about government, regulation, and electricity tariffs, exceptional Internet redundancy, and electricity. The United States is the most energetic country in the world. “
Taken together, the European mining industry has a bumpy road ahead of it. But if the right decisions are made, it can become very competitive. However, it still has to catch up with other countries like China or even the United States. USA, which appears to be the most attractive option for tall miners.