6 months ago

    Why Europe has a critical role in Bitcoin mining?

    Table of contents

      Bitcoin Mining Overview 2019-2023

      The most mobile industry in the world: dramatic shift from China to the United States

      The most profound transformation within the Bitcoin mining sphere is China’s drastic decline, from 72% in 2019 to just 15% in 2023. This sharp decrease is widely attributed to the Chinese government’s stringent crackdown on Bitcoin mining. Meanwhile, in stark contrast, the United States has experienced a remarkable surge, skyrocketing from a modest 6% to an impressive 40%. This surge cements the U.S. as the new titan in the global Bitcoin mining landscape and fuels speculations. There’s a growing belief that main U.S. financial institutions might be behind this surge, engaging in covert mining operations. The rationale? It’s seen as a more subtle strategy for these institutions to accumulate Bitcoin, anticipating the forthcoming ETF without causing a market frenzy that would drive Bitcoin’s price sky-high.

      Kazakhstan’s rise and decline: Kazakhstan briefly emerged as a prime destination for Bitcoin mining, capitalizing on its low energy costs and lenient regulations. This surge followed China’s crackdown on mining, leading to an influx of miners into Kazakhstan. However, the country’s infrastructure struggled with increased demand, causing power shortages. Subsequently, new regulations, higher taxes, and political instability quickly curtailed this mining boom, underscoring the volatile nature of the global Bitcoin mining landscape.

      Russia’s response to dollar weaponization: Russia’s Bitcoin mining trajectory paints a bleak picture of flight to safety. Consistently hovering around 6-7% until 2022, the country significantly leaped to 12% of the global hashrate in 2023. This notable upsurge is likely a direct reaction to the United States’ financial maneuvers, specifically the weaponization of the dollar in the wake of the Ukraine conflict. By blocking the bank accounts of oligarchs and Russian officials, the U.S. pushed Russia into a corner, prompting a strategic pivot towards bitcoin.

      The Fluctuating Role of European Countries: While Europe doesn’t play a significant role in Bitcoin mining, the subtle increases in countries like Norway, Sweden, and Iceland, known for their renewable energy sources, could indicate a growing interest in sustainable crypto mining practices. But there’s a silver lining: Europe might mitigate some of the most significant risks facing Bitcoin as we head into 2024.

      The three horsemen of the Bitcoin mining apocalypse

      1. Political Risk: The USA’s Hashrate Hegemony

      In the dystopian realm of Bitcoin mining, the first horseman rides under the banner of ‘Political Risk’. Picture this: the United States, already brandishing over 50% of Bitcoin’s hashrate, decides to play hardball. They could unleash a ‘seize and desist’ fury on transactions, echoing their stance on Ethereum. The SEC asserted Ethereum transactions occurred in the US because of where blockchain validation nodes were clustered. The implication for Bitcoin? A chilling reminder of how centralized power—even in a decentralized network—can twist the arm of a global giant.

      Now, imagine the USA whispering, ‘Bitcoin is ours’. The Bitcoin world might react strongly. Panic? Check. Chaos? Check. A reshuffling of the mining landscape? Double check. The lesson? When Uncle Sam sneezes, Bitcoin might catch a cold in that scenario. In this high-stakes drama, Europe emerges as the only sizeable democratic region left standing. They’ve got the stage brought by regulation, taxes, and banks, but do they have what it takes to play a more significant role?

      2. Environmental risk, but not what you think

      The second horseman gallops in on a wave of environmental concern. Bitcoin, with a penchant for hydropower (accounting for a whopping 54% of its energy diet), finds itself at a crossroads. Parts of the world is witnessing its worst dry spell in 40 years. Rivers are running dry. There are even faulty research alleging that bitcoin mining uses “too much” water somehow missing the comparison of bitcoin with any other industry or the positive impacts bitcoin has on renewable energy financing.

      But there is much more to this story. Bitcoin might be the unexpected knight in shining armor for water scarcity. Enter desalination, the pricey tech darling of the water world. Bitcoin mining could help foot the energy bill for desalination plants. How? By sipping on their excess solar power. Plus, all that heat Bitcoin mining generates? Apparently, it’s just what desalination needs.

      3. Geopolitical Tensions and Energy Dependence

      The third horseman in our Bitcoin mining apocalypse parade is none other than ‘Geopolitical Tensions and Energy Dependence’. Europe finds itself in a geopolitical chess game, with energy as the queen everyone’s trying to protect. The looming shadow? Russia, with its fingers on the energy pulse of many European nations. This is a game of high stakes, where energy dependence translates into political vulnerability.

      In the grand theater of Bitcoin mining, energy is the lead actor. Following Russia war in Ukraine, Europe’s energy security is at risk and it’s been cornered out of mining Bitcoin with fossil fuels. Maybe for the better, but by all means a power move by Russia that ended up commanding so much of the hashrate and Europe so little. What if most of the new world financial system will be moving to efficient bitcoin rails, it is a future risk that one region just diminish their position so much so quickly?

      Bitcoin mining 2026 – fueled by solar grid balancing tech

      Harnessing the Power of the Sun: Europe’s Foray into Sustainable Bitcoin Mining

      Jaran Mellerud
      Jaran Mellerud

      “In 2026, the bitcoin mining industry will be more competitive than it currently is, due to the combination of the 2024 halving and more hashrate coming online. This competitive dynamic will force miners to tap into cheaper electricity sources than currently. These sources are mostly found in frontier markets in Africa, Latin America, and Southeast Asia. Thus, I’m confident these regions’ share of the global hashrate will be considerably higher in 2026 than currently. Particularly Africa will see tremendous growth – I would not be surprised if they hold 15% of the global hashrate by 2026, which would be a massive increase from their current 2% market share.”

      As we gaze into the crystal ball of bitcoin mining’s future, Europe’s role appears increasingly pivotal, particularly in the context of solar power and grid balancing technology. The data from 2019 to 2026 paints a picture of a global shift in Bitcoin mining, with Europe steadily carving out its niche in this landscape. By 2026, Europe’s share in Bitcoin mining is projected to rise to 14.2%, a remarkable leap from just 2.464% in 2019. This surge can be attributed to several key factors.

      Why Europe needs to step up

      So, why should Europe step up in the Bitcoin mining arena? It’s simple: diversification is the name of the game. By investing in and expanding their renewable energy resources opened to Bitcoin mining, Europe can reduce its reliance on external energy sources. It’s like switching from a diet of fast food to a balanced meal; healthier, more sustainable, and far less risky. By embracing Bitcoin mining, Europe doesn’t just bolster its own energy independence; it also positions itself as a democratic, transparent, and environmentally responsible player in the global crypto stage. It’s a chance to lead by example, showing that economic growth and environmental stewardship can waltz together in harmony.

      Firstly, Europe’s commitment to renewable energy, especially solar power, is a game-changer. With advancements in grid balancing technology, Europe is uniquely positioned to integrate large-scale Bitcoin mining operations with its energy infrastructure. This technology allows for the efficient use of excess solar energy, especially during peak production hours, mitigating the common criticism of Bitcoin mining’s energy consumption.

      Secondly, Europe’s regulatory environment is increasingly supportive of cryptocurrency and blockchain technologies, fostering a conducive atmosphere for growth and innovation in Bitcoin mining. The continent’s push towards a digital and green economy aligns well with the ethos of sustainable Bitcoin mining.

      Moreover, Europe’s strategic move into Bitcoin mining is not just about energy efficiency; it’s a bold step towards technological leadership in the global financial sector. By harnessing the power of solar energy and innovative grid technologies, Europe is poised to set a new standard in sustainable cryptocurrency practices.

      In conclusion, after doing a 3-4x in the past 4 years, the forecast for Bitcoin mining looks powered by the sun and propelled by cutting-edge technology. This shift not only represents a significant economic opportunity but also a commitment to a more sustainable and responsible approach to bitcoin mining. As the data suggests, by 2026, Europe could emerge as a leading player in the Bitcoin mining arena.

      Forecasts are easy to make but only a few come true. Will circle back on this one and let you know how we did.

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