Texas has a major presence in the U.S. Bitcoin mining industry, as found by the world's largest mining pool, Foundry USA.This is attributed to its pro-crypto regulations and energy provider ERCOT's supportive stance.The influx of miners is mainly from southern and midwestern states such as Nebraska, North Carolina, Kentucky, and Oklahoma. Zhang and the Foundry crew are currently expanding their reach into Ethereum mining, which is more complex and capital-intensive than bitcoin mining.
Kevin Zhang has been in the business of mining bitcoin for a decade and he has weathered numerous bear markets in that time. This hasn't deterred him from taking risks; in the face of a 2013 Chinese ban on bitcoin, when the cryptocurrency started to crash and Western companies went bankrupt, he seized the opportunity to use his language and cultural knowledge to become the largest overseas customer of Chinese ASIC manufacturers. The result was the largest bitcoin mining facility in North America. Zhang has since carried a bold attitude to Foundry, a mining company under Barry Silbert's crypto empire. When Covid cases rose and the most recent halving slashed the mining reward to 6.25 bitcoin in May 2020, the Foundry team boldly invested tremendous resources into their business, deploying tens of thousands of machines. By the end of November 2021, bitcoin had reached its highest price of nearly $70,000. Now, Zhang and Foundry are taking even greater risks by expanding into the more demanding Ethereum mining.
As the impending halving approaches, traders anticipate a potential price surge for Bitcoin, but the reduced reward for miners could spell disaster for some in the industry with increasingly slim margins. "This is the ultimate test for miners," said Zhang, Foundry's senior vice president of business development. "Some may not make it through; some may. But I feel confident that if they work with us, and work with other strong actors, they may have a good chance to survive this.”
Foundry is expanding its operations to equip miners for the upcoming halving - offering new and used machines via FoundryX, logistics for deployment and shipment of miners, and managed site services in the USA. Despite the risks, Zhang remains confident in Bitcoin and its mining industry. “Foundry is in this for the long haul," she said. "We're taking a long-term bet on bitcoin and on the fact that bitcoin mining will survive and will bounce back even stronger.”
The spread of mining operations across the US is evident in the Foundry USA Pool, despite some states actively legislating against large scale operations. Mining pools let single miners combine their hashing power with others, allowing them to spread their geographic footprint with a virtual private network.
The new data shows that Texas is now firmly the crypto hub of the United States, as miners flock in for generous renewable energy sources and a positive regulatory environment. Data aggregated at the end of 2021 showed that Texas held 8.43% of US hashrate, which has now grown to 28.50% according to Foundry's data from July 27, 2023. Foundry's COO Felix Zhang suggests that the firm's expansion in Texas over the last two years has contributed to the increase in their maps. As the leading nation in terms of bitcoin network share, this success makes Texas the world's bitcoin mining capital. Texas's success can be attributed to the support of local government and the Electric Reliability Council of Texas (ERCOT), who facilitate deals with bitcoin miners, offering incentives for them to take power during times of low demand and switch off during peak demand. Nic Carter, research from Castle Island Ventures, Shaun Connell, CEO of Lancium, and ex-interim Chief of ERCOT Brad Jones all worked together on a report that suggested that the incidences of negative prices across US wholesale markets had soared to 6% by 2022. With the rapid developments of wind and solar energy in Texas, this figure is likely to increase, making it a veritable haven for bitcoin miners.
Brandon Arvanaghi, who now runs Meow, a company that enables corporate treasury participation in crypto markets, believes that miners can benefit from being paid slightly more than what they would have made mining for bitcoin that hour. He termed this a "win-win" situation. For instance, bitcoin miner Riot Platforms earned over $31.7 million in July for shutting down its Rockdale mine near Austin, with $24.2 million of that money coming from energy sold back to the ERCOT grid and the other $7.4 million stemming from demand response credits. Jason Les, CEO of Riot, described the effects of the credits as "significantly lowering Riot's cost to mine Bitcoin," which makes it one of the most cost-efficient Bitcoin producers in the industry.
Despite the bear market, Texas miners are still investing in new sites and hardware. Companies such as Riot Platforms are looking to expand their operations to other parts of the state like Navarro and Milam counties, while Bitdeer has spun off from Bitmain and gone public through SPAC. Cipher Mining acquired 11,000 new machines for its facility in Odessa and Foundry has purchased Compute North's mining sites from its bankruptcy estate in Big Spring and Minden, Nebraska.
Elsewhere in the U.S., areas that had previously led in bitcoin mining saw their dominance decrease. Over the two year period, Georgia's portion of the U.S. hashrate dropped from 34.17% to 9.64%. The downturn was a result of factors such as the expansion of Foundry's operations, the popularity of Texas, and a certain mining outfit in the state declining to be included in the map. New York's share of the U.S. hashrate went from 9.53% to 8.75%, largely due to a moratorium issued against miners in November 2022. On the other hand, New Hampshire and Pennsylvania experienced notable growth, while Nebraska, North Carolina, Kentucky, Oklahoma and Washington all experienced considerable losses. Despite the devaluation of bitcoin and the increased regulatory attention from the Securities Exchange Commission, the total U.S. hashrate experienced more than a doubling from the conclusion of 2021. According to an analyst note from JPMorgan Chase, the bitcoin network witnessed a record high for the eighth consecutive month in August. Foundry claims this was partly the result of businesses entering the bitcoin space. JPMorgan analysts also established that the mining sector has gotten less rewarding - miners earn an average of $66,400 per day per exahash of mining capacity, compared to nearly $342,000 at the peak of bitcoin in November 2021. In terms of market capitalization, the 14 U.S.-listed miners tracked by the bank have seen a decline beneath $10 billion. Riot was the most significant loser in August, dropping by 39% while Bitdeer was the highest gainer, increasing by 30%.
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