In brief
- Generous electricity subsidies as well as crushing inflation in Argentina have made Bitcoin mining a popular business.
- After independent miners, larger outfits like Bitfarms are also taking notice.
More and more residents of Argentina are turning to Bitcoin mining amid economic uncertainty and generous electricity subsidies provided by the government, Bloomberg reported today.
“Even after Bitcoin’s price correction, the cost of electricity for anyone mining from their house is still a fraction of the total revenue generated,” Nicolas Bourbon, who has experience in crypto mining, told the outlet.
This became possible thanks to a longstanding policy that allows Argentinians to receive substantial electricity subsidies from the government. So much so that a consumer power bill reportedly amounts to only 2-3% of an average monthly income.
By comparison, electricity costs at least twice as much in other Latin American countries like Brazil, Colombia, or Chile.
Meanwhile, Argentinians are desperately looking for alternative assets that can serve as a hedge in the face of the rampant 50% annual inflation. To make matters worse, the government only allows residents to swap their pesos for up to $200 per month, further catalyzing the depreciation of Argentine pesos.
“The crypto that miners generate is typically sold at the parallel exchange rate, but the energy is paid for at a subsidized rate. At the moment, revenues are very high,” Bourbon explained.
Big players eye Argentina
Large international mining firms have also noted the boom. Bitfarms, one of the largest Bitcoin mining companies globally, revealed that it plans to use a local power plant in Argentina to draw up to 210 megawatts of electricity.
“We were looking for places that have overbuilt their electrical generation systems. Economic activity in Argentina is down, and power is not being fully utilized. So it was a win-win situation,” Bitfarms president Geoffrey Morphy told Bloomberg.
While subsidies won’t fully cover the company’s operations, Argentina still offers an attractive rate of $0.022 per kilowatt-hour—which is far more lucrative than the industry’s average of $0.06. “Miners know the subsidies are ridiculous,” said Bourbon. “They simply take advantage of it.”
Although Argentina’s generous electricity subsidies are slowly fueling discord among local politicians, Bitcoin mining will likely continue to remain quite a lucrative activity—at least for some time.