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Bitcoin Miners are Squeezed By Lack of Data Centers Amid China's Clampdown

Godfrey Benjamin   Jul 08, 2021 09:20 2 Min Read


The ongoing price upset in the global cryptocurrency industry is caused partly by the clampdown on Bitcoin mining and all other cryptocurrency-related activities from China.

The reduction in the engagement of miners has not only stopped the inflow of computing power into the Bitcoin network stirring a massive drop in the mining hashrate; it has notably made mining more profitable for existing and running miners.

Crypto miners are selling off their hardware, while some migrate to new safe havens, particularly the United States and Kazakhstan. A problem persists, as reported by Bloomberg, and that is the unavailability of data centres to house the scores of mining machines leaving China. This has created a situation where miners are willing to pay above the normal premium to secure a spot in data centres.

“People are paying an arm and a leg to find hosting right now,” said Christian Kaczmarczyk, a principal at venture capital firm Third Prime. “These miners from China are willing to pay 6, 7, 8, 9 cents to get in the game. They’ll pay whatever.”

The mining problem has shifted from the lack of supply of machines to the lack of enough data centres to house them. The offset caused and the ensuing drop in hashrate implies that for the same amount of work done by this time last year, as much as thrice, the reward can be received, but only for miners in regions whose activities have not been disrupted by regulations.

Per the Bloomberg report, the efforts to build new data centres may stall, as there are no readily available materials to fast track the establishments.

“Machines are no longer the bottleneck,” said Meltem Demirors, chief strategy officer at CoinShares. “Hosting facilities are. You just can’t build a massive co-location data centre in a few months.”

With firms like Argo Blockchain securing a $20 million loan to build a new facility amidst other similar gestures from other firms, the likelihood of resolving the space shortage in the near term is at a low ebb.


Image source: Shutterstock

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