Bitcoin miners in China lose access to cheap electricity

Bitcoin miners in China's Inner Mongolia will no longer be provided subsidized electricity to run their operations, according to WuBlockchain.

Northern China’s naturally cool climate, access to a cheap, able workforce, and government policies like subsidized electricity have historically supported the growth of mining businesses in the region. Bigwigs like AntPool, which make hundreds of millions in revenue each year, are situated in the region and are part of a mining cohort that contributes to China’s massive 60% share of Bitcoin’s total hash rate. But that might be about to change.

“China's Inner Mongolia suddenly issued a policy on (August) 24th, requiring the cancellation of preferential electricity prices for crypto mining,” said Colin Wu, a reporter in China focused on mining and industry regulations.

The move was prompted after authorities raised concerns about mining firms that hold licenses to receive subsidized electricity. The main issue was an overall lack of incentive for the local government and non-existent benefit to the broader Mongolian regions for supporting mining businesses.

“[Mining] has nothing to do with the real economy,” said a notice last year, the report stated.

Wu added that the move will see an increase in electricity prices for miners by over 33%, with miners reportedly worried that Xinjiang—a nearby mountainous region in Northwest China—will similarly follow.

Is Bitcoin Mining Still Profitable in 2021?

Since falling to just $5,000 less than a year ago, the price of Bitcoin (BTC) has been on a meteoric uptrend, with the leading cryptocurrency seeing its value grow by more than 340% in the last year. At the same time, the Bitcoin hash rate has increased by more than 41% in the last year, recently reaching its highest ever value in January 2021. In May 2020, Bitcoin also completed its third halving event, which saw the amount of Bitcoin mined each day cut in half. With all these factors coincidi...

At least 21 mining businesses are affected, including some of the “largest players,” the report said. However, it added that “not all companies” operating in the region were affected, with no specific names disclosed.

Bitcoin mining—although attractive as a business with the lure of huge revenues—is a cutthroat venture with operators battling high setup costs and shaky government regulations to eke out profits.

And for mining hopefuls in Inner Mongolia, that narrative just got more difficult. An increase in electricity rates means a direct hit to profitability. But, for the rest of the world, the playing field is about to become much more even.

Update: We have clarified the source of the story.