BTC miners worry about cheap power, abuse of tariff powers

Block reward mining is increasing its use of renewable energy sources but access to cheap electricity remains miners’ top concern—that is, besides Trump’s tariffs.

The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge’s Judge Business School just released a new Digital Mining Industry Report. The report spotlights trends in electricity consumption, hardware evolution, mining economics and the sentiments of mining operators as the price of the BTC token often fails to keep pace with the costs of their operations.

The report surveyed 49 companies between June and September 2024, and 98.5% of the total power capacity reported by these companies was focused on BTC mining. The report claims these companies represented 48% of the BTC network hashrate as of June 2024.

For these companies, mining other tokens claimed just 1.06% of total power capacity, while other high-performance computing (HPC) tasks—like serving as artificial intelligence (AI) data centers—represented only 0.46%. The report claims that while AI operations offer higher revenue potential, they also require “significantly greater capital expenditure,” offering a higher barrier to entry for companies looking to diversify their operations.

The surveyed companies’ headquarters were based in 16 different countries, although their operations may be more widely distributed. There are some serious caveats regarding the reported geographic distribution of reported mining activity, including zero data on China’s percentage of network hashrate.

The authors note that American miners were “considerably” more likely to participate in the survey than those in other jurisdictions. As a result, the report claims that 75.4% of mining activity is United States-based, with Canada at a distant second (7.1%) and Paraguay at third (3.4%). The report notes that Russia, to which the survey attributes a 2.3% share of global hashrate, has likely been “significantly” underrepresented in the results.

The authors note that while America “clearly stands as the pre-eminent global Bitcoin mining hub,” the survey’s limitations mean its true share of global hashrate may be closer to 36%. Conversely, while the report credits Ethiopia with a mere 0.1% of global hashrate, the authors find it “plausible” that the country—along with other African countries—“may already host significantly more mining activity than the survey results indicate.”

Energy

BTC miners’ annualized electricity consumption as of June 2024 was up 17% year-on-year, reflecting the halving of the BTC block rewards several months prior and the corresponding rise in network difficulty.

Miners now account for 0.54% of global electricity consumption, which sounds minuscule until you realize that BTC is a purely speculative financial vehicle, and the benefits tend to accrue to an even smaller slice of the global population. Which basically makes all BTC energy consumption a selfish waste.

The report offers evidence to bolster both sides of this debate, including the fact that just 26% of miners use ‘off-grid’ energy sources, aka “electricity produced independently of centralized power grids, relying on locally sourced energy such as solar, wind, or hydropower.” And off-grid energy accounted for just 8.1% of miners’ total power consumption.

However, the report claims that sustainable energy sources accounted for 52.4% of miners’ electricity mix—up from 37.6% in 2022—led by hydropower (23.6%), wind (15.4%), nuclear (9.8%), solar (3.2%), and ‘other’ (0.5%).

Fossil fuels accounted for 47.6% of miners’ electricity demands, led by natural gas (38.2%), which also claimed the single largest overall power source of any kind. Coal claimed an 8.9% share—down from 36.6% in 2022—while oil was well back at 0.5%.

Here again, disputes arise as to the accuracy of these figures. Alternate estimates claim sustainable sources account for a much lower slice (37.6%) of miners’ electricity draw, while coal’s contribution may be as high as 14.2%.

Coal’s share could rise even higher given U.S. President Donald Trump’s focus on removing constraints on ‘clean’ coal production and his campaign pledge to provide cheap energy for U.S.-based miners. (And don’t forget, Trump is in the mining business now, so he doesn’t want to pay for anything.)

U.S. Commerce Secretary Howard Lutnick recently told Bitcoin Magazine that the administration was creating a regulatory environment that will allow miners to “build your own power plant” wherever they want to operate. “Miners are going to put their data centers on top of gas fields, and then put a plant right next to them … the next generation of miners in America will be able to control their destiny and control the cost of power, [which], I think, is going to turbocharge Bitcoin mining in America.”

According to the report, 6.8% of miners are already installing modular mining rigs near oil drilling sites, allowing them to use excess natural gas that’s ‘flared’ or ‘vented’ during the extraction process. Advocates claim this helps reduce the amount of these gases entering the atmosphere, thereby helping to reduce the global warming impact. Excess gas use accounted for 3.3% of miners’ total energy consumption.

Economics

The wildly fluctuating price of the BTC token—which went from $54,000 last September to nearly $109,000 this January, then back down to $76,000 in early April to its current price of ~$95,000—has played havoc with miners’ ability to plan for the future and pay their bills.

A further wrinkle developed following Trump’s imposition of economic tariffs on nearly every other country. The steepest tariffs were imposed on China and other Southeast Asian nations, the source of most of the ASIC rigs miners use to power their operations.

ASIC manufacturing is currently dominated by three companies, led by China-based Bitmain with an 82% market share. China-based MicroBT is a distant second (15%), while Canaan Inc. (NASDAQ: CAN) is an even more distant third (2.1%). Together, these three account for 99% of the ASIC mining hardware market, although firms like Bitmain offshoot Bitdeer (NASDAQ: BTDR), Auradine, and Proto are trying to disrupt this oligopoly.

Trump’s tariffs caused some miners to pause or cancel existing rig orders, while others chose to accelerate delivery in the hope of getting their rigs stateside before the doors banged shut. Bloomberg recently reported on how some miners spent 4x of their normal shipping costs in a bid to beat this clock while moaning about the ‘fluidity’ (aka inscrutable flip-flopping) of Trump’s tariff plans.

CoinDesk recently reported that some U.S. operators have purposely lowballed the value of their imported rigs on customs paperwork, a fraudulent bet intended to offset the cost of the tariffs but something that could bring down Trump’s wrath if exposed.

The ever-improving efficiency of mining rigs is a double-edged sword, as miners must keep pace with rivals or risk lowering the number of block rewards they earn. For instance, surveyed operators expected to retire over 11% of the overall network hashrate between June 30 and December 31, 2024. Some of these rigs may be fobbed off on smaller operators, while others will have simply reached the logical end of their lifecycle. Of these retired rigs, 13% end up as non-recycled e-waste.

The report claims direct electricity costs account for 81% of miners’ operating expenditures, but the total cost—including replacing older rigs—often leaves miners operating in the red (and leaves investors in the dark). While the recent spike in BTC’s fiat price has given miners a temporarily profitable cushion, it was only weeks ago that miners were losing $10,000 or more on each BTC they mined. What will the morrow bring?

Night sweats

The report has a section titled ‘Miner Sentiment’ that asked operators what kept them up at night. Their most pressing concern was long-term electricity prices, with 57.5% of those surveyed calling it either a ‘high’ or ‘severe’ concern.

Unfavorable governmental action notched a 46.8% high/severe score, while an ‘unforeseen spike’ in mining difficulty scored 44.7%, and an “adverse development” in BTC’s price scored 40.5%.

“Manufacturer counterparty risk,” aka non-delivery or delayed delivery of mining rigs, scored only 19.2% on the high/severe scale, but remember that this survey was conducted last summer, back when Trump’s campaign homages to the word ‘tariffs’ were considered by many to be more posturing than policy.

Interestingly, ‘local resident complaints’ ranked lowest on the concern chart, suggesting miners are confident in their future ability to reduce the noise of their operations that has irked so many locals. Or maybe operators are increasingly confident that the U.S. government will just take their side regardless of how vocal the complaints get or how many court injunctions are issued.

The future

Some operators like CleanSpark have proudly labeled themselves ‘pure-play’ BTC miners, while others like Iris Energy (NASDAQ: IREN) have halted further mining expansion in order to build up their AI data centers and cloud infrastructure. Still others, like Core Scientific (NASDAQ: CORZ), are keeping a foot in each camp.

AI’s electricity consumption is projected to grow at an annual rate of 14.5% through 2030, significantly higher than the 2% rate of growth in global electricity demand. This will make supplies of cheap electricity even more important for operators involved in both mining and AI.

It’s a lot cheaper to set up a mining operation than an AI/HPC-focused business. However, the revenue potential of AI/HPC operations is significantly higher per megawatt hour than mining while also having the added benefit of being more predictable, given mining’s inherent volatility.

In the end, pivoting to AI might be the smartest thing any miner does because BTC mining lacks a long-term future. The block rewards will continue to shrink, but Satoshi Nakamoto’s long-term plan for transaction fees to offset this decline can’t happen on BTC because most BTC transactions involve trades on digital asset exchanges and are never actually written to the blockchain.

Basically, BTC was rebranded as speculative “digital gold” rather than utilitarian “peer-to-peer electronic cash” because nobody uses BTC to buy anything. The artificially constrained size of BTC’s individual blocks precludes there ever being a sufficient number of transactions—let alone cost-effective microtransactions—for miners to earn sufficient revenue from fees.

In other words, it is better to pivot to AI than drive straight off BTC’s rapidly approaching cliff.

Watch: Untangling Bitcoin mining at the CoinGeek Weekly Livestream