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The new facility, called the Panther Creek plant, generates a maximum 80 megawatts and will nearly double Stronghold’s total net capacity across its two plants to 165 MW. It sits on a 33-acre site in the northeastern Pennsylvania borough of Nesquehoning

Stronghold says it raised approximately $74 million in lease financing to fund the acquisition of a second facility. Of the $74 million, $40 million came from WhiteHawk Capital Partners, a private credit investment manager. The remaining $34 million is from Arctos Credit, an affiliate of NYDIG.

Greg Beard, CEO of Stronghold, looks forward to mining bitcoin (BTC, -4.16%) at “some of the lowest costs in the industry” while also helping the environment. “Coal refuse sites continue to wreak havoc across Pennsylvania,” Beard said in a press release. “We very much welcome the bipartisan political support to continue remediating these vast sites and return the land to the local community.”

In June, Stronghold raised $105 million to open its first plant in Kennerdell, Pa. On July 27, it registered for a $100 million initial public offering (IPO) with the U.S. Securities and Exchange Commission (SEC).

The Pennsylvania company converts waste coal, a material left over from coal mining, into power used to mine bitcoin and other cryptocurrencies. The company estimates that for each bitcoin mined, 200 tons of waste coal is eliminated.

But the changing dynamics of the market show that as the crypto market grows bigger, relying on just one or two metrics can’t always reveal the full story of what’s going on.

Data from blockchain data firm Glassnode shows that the balance of bitcoin on all exchanges fell 4.1% to 2.48 million from 2.587 million in the last four days of July.

The market’s initial reaction to the drop was positive, because as recently as last September, a decrease in the number of bitcoin held on all exchanges came at the same time as a price rally.

The presumed logic is simple: More BTC was moved off exchanges, potentially to cold storage wallets, as investors became more bullish about the long-term value of their bitcoin holdings.

But after analysts took a closer look at the data, particularly given that the recent drop was much steeper than the previous one, they said that the decline may not necessarily reflect just bullish sentiment.

It is “really hard to know what’s happening with just one dimension,” Willy Woo, an independent blockchain data analyst, told CoinDesk. “As the network changes, the measuring stick does along with it.”

Indeed, just as the market started noticing the drop, crypto exchange Kraken, for example, announced last week that the bitcoin balance drop on its exchange was the result of its internal transfers, which immediately damped some of the initial excitement. 

“We can’t confirm that the drop is not entirely due to exchanges’ internal transfers,” Philip Gradwell, chief economist at blockchain data firm Chainalysis, said. “Some are, but not all, and potential withdrawals need to be observed for longer to see if they are genuine withdrawals.

“This makes giving definitive statements on exchange balances far back in the past pretty tricky,” he concluded. “We are working on an improvement to understanding this.”

Clara Medalie, research lead at blockchain data firm Kaiko, said that while it is easy to tell which addresses belong to an exchange, many more entities such as over-the-counter (OTC) desks and brokers associated with the exchanges are receiving lots of bitcoin.

“Thus, it is difficult to actually measure an exchange outflow because these transfers very well could just be being sent to other exchanges or trading desks, or simply between addresses on the same exchange,” Medalie said.

Some argue, however, that by also looking at a few other blockchain data metrics, last week’s drop in bitcoin’s balance on exchanges might still reflect a bullish market sentiment by large.

Woo told CoinDesk that when the drop took place last week, the holdings of the cohorts owning small, medium and large amounts of bitcoin increased, showing some aggressive purchases by both bitcoin whales (large holders) and smaller investors.

As CoinDesk reported, the actual number of BTC available for trading is much lower than bitcoin’s current supply at 18.77 million, or 89% of the 21 million cap, because of increased hoarding by investors and the permanent loss of mined BTC over the years. A decline on BTC’s balance on exchanges and increased BTC balances of holders across their wallet addresses indicate that some of the coins were sold to buyers off the exchanges.

“The largest of the whales may be exchanges that were previously thought of as distinct separate entities, when now we discover in effect they were exchanges all along,” Woo said. “‘Shrimps (bitcoin holders with less than one BTC) to smaller whales all increased their holdings … These guys are unlikely to be exchanges, so it validates most of the coins that left exchanges are real.” 

As data from Glassnode shows, in the past two weeks, the total circulating supply held by entities with different amounts of BTC all increased, with the exception of entities with balances between 100 and 1,000 BTC, and those with balances of more than 100,000 BTC.

“When I see big outflows like this, I think that traders ‘like the price’ and are willing to hold over a longer time period,” George Kaloudis, research associate at CoinDesk, said. “It certainly shows that investors are more willing to weather the storm in the near-term given the friction of moving funds back on exchanges to liquidate.”

The outflows of bitcoin balance on exchanges, based on analysis by Chainalysis, is also a case-by-case situation, an indication that some investors and traders may have changed their preferred platforms for trading and other crypto activities.

As the chart below shows, the drop in the number of bitcoin held on crypto-to-crypto exchanges was much steeper than the drop in bitcoin balances on crypto-to-fiat exchanges since May 1.

“I think much of the bitcoin that has been withdrawn is moving exchanges, as people change which exchanges they trade on,” Gradwell said.

Even though it is not clear what has triggered the change of preferred crypto exchanges by traders and investors, Binance, the most popular crypto exchange by trading volume, has faced tougher regulatory actions in countries around the world.

Bitcoin’s recent outflows from exchanges “was presumably catalyzed by Binance’s announcement of dramatically lower withdrawal limits for non-KYC (know-your-customer) customers,” blockchain research firm Delphi Digital wrote in its daily market update on July 29, which also noted that Binance and Coinbase were the top two exchanges in terms of absolute outflows.

Binance also said that its users in Germany, Italy and the Netherlands won’t be able to open new futures and derivative positions on the platform.

On the other hand, the shift in preference for crypto-to-fiat exchanges also could signal that new investors in crypto are more comfortable with bitcoin investments only, according to CoinDesk’s Kaloudis.

“We are seeing new entrants to the bitcoin market who are presumably less comfortable trading across cryptos in general, [which is] theoretically more bullish for bitcoin adoption,” he said.

But the changing dynamics of the market show that as the crypto market grows bigger, relying on just one or two metrics can’t always reveal the full story of what’s going on.

Data from blockchain data firm Glassnode shows that the balance of bitcoin on all exchanges fell 4.1% to 2.48 million from 2.587 million in the last four days of July.

The market’s initial reaction to the drop was positive, because as recently as last September, a decrease in the number of bitcoin held on all exchanges came at the same time as a price rally.

The presumed logic is simple: More BTC was moved off exchanges, potentially to cold storage wallets, as investors became more bullish about the long-term value of their bitcoin holdings.

But after analysts took a closer look at the data, particularly given that the recent drop was much steeper than the previous one, they said that the decline may not necessarily reflect just bullish sentiment.

It is “really hard to know what’s happening with just one dimension,” Willy Woo, an independent blockchain data analyst, told CoinDesk. “As the network changes, the measuring stick does along with it.”

Indeed, just as the market started noticing the drop, crypto exchange Kraken, for example, announced last week that the bitcoin balance drop on its exchange was the result of its internal transfers, which immediately damped some of the initial excitement. 

“We can’t confirm that the drop is not entirely due to exchanges’ internal transfers,” Philip Gradwell, chief economist at blockchain data firm Chainalysis, said. “Some are, but not all, and potential withdrawals need to be observed for longer to see if they are genuine withdrawals.

“This makes giving definitive statements on exchange balances far back in the past pretty tricky,” he concluded. “We are working on an improvement to understanding this.”

Clara Medalie, research lead at blockchain data firm Kaiko, said that while it is easy to tell which addresses belong to an exchange, many more entities such as over-the-counter (OTC) desks and brokers associated with the exchanges are receiving lots of bitcoin.

“Thus, it is difficult to actually measure an exchange outflow because these transfers very well could just be being sent to other exchanges or trading desks, or simply between addresses on the same exchange,” Medalie said.

Some argue, however, that by also looking at a few other blockchain data metrics, last week’s drop in bitcoin’s balance on exchanges might still reflect a bullish market sentiment by large.

Woo told CoinDesk that when the drop took place last week, the holdings of the cohorts owning small, medium and large amounts of bitcoin increased, showing some aggressive purchases by both bitcoin whales (large holders) and smaller investors.

As CoinDesk reported, the actual number of BTC available for trading is much lower than bitcoin’s current supply at 18.77 million, or 89% of the 21 million cap, because of increased hoarding by investors and the permanent loss of mined BTC over the years. A decline on BTC’s balance on exchanges and increased BTC balances of holders across their wallet addresses indicate that some of the coins were sold to buyers off the exchanges.

“The largest of the whales may be exchanges that were previously thought of as distinct separate entities, when now we discover in effect they were exchanges all along,” Woo said. “‘Shrimps (bitcoin holders with less than one BTC) to smaller whales all increased their holdings … These guys are unlikely to be exchanges, so it validates most of the coins that left exchanges are real.” 

As data from Glassnode shows, in the past two weeks, the total circulating supply held by entities with different amounts of BTC all increased, with the exception of entities with balances between 100 and 1,000 BTC, and those with balances of more than 100,000 BTC.

“When I see big outflows like this, I think that traders ‘like the price’ and are willing to hold over a longer time period,” George Kaloudis, research associate at CoinDesk, said. “It certainly shows that investors are more willing to weather the storm in the near-term given the friction of moving funds back on exchanges to liquidate.”

The outflows of bitcoin balance on exchanges, based on analysis by Chainalysis, is also a case-by-case situation, an indication that some investors and traders may have changed their preferred platforms for trading and other crypto activities.

As the chart below shows, the drop in the number of bitcoin held on crypto-to-crypto exchanges was much steeper than the drop in bitcoin balances on crypto-to-fiat exchanges since May 1.

“I think much of the bitcoin that has been withdrawn is moving exchanges, as people change which exchanges they trade on,” Gradwell said.

Even though it is not clear what has triggered the change of preferred crypto exchanges by traders and investors, Binance, the most popular crypto exchange by trading volume, has faced tougher regulatory actions in countries around the world.

Bitcoin’s recent outflows from exchanges “was presumably catalyzed by Binance’s announcement of dramatically lower withdrawal limits for non-KYC (know-your-customer) customers,” blockchain research firm Delphi Digital wrote in its daily market update on July 29, which also noted that Binance and Coinbase were the top two exchanges in terms of absolute outflows.

Binance also said that its users in Germany, Italy and the Netherlands won’t be able to open new futures and derivative positions on the platform.

On the other hand, the shift in preference for crypto-to-fiat exchanges also could signal that new investors in crypto are more comfortable with bitcoin investments only, according to CoinDesk’s Kaloudis.

“We are seeing new entrants to the bitcoin market who are presumably less comfortable trading across cryptos in general, [which is] theoretically more bullish for bitcoin adoption,” he said.

But the changing dynamics of the market show that as the crypto market grows bigger, relying on just one or two metrics can’t always reveal the full story of what’s going on.

Data from blockchain data firm Glassnode shows that the balance of bitcoin on all exchanges fell 4.1% to 2.48 million from 2.587 million in the last four days of July.

The market’s initial reaction to the drop was positive, because as recently as last September, a decrease in the number of bitcoin held on all exchanges came at the same time as a price rally.

The presumed logic is simple: More BTC was moved off exchanges, potentially to cold storage wallets, as investors became more bullish about the long-term value of their bitcoin holdings.

But after analysts took a closer look at the data, particularly given that the recent drop was much steeper than the previous one, they said that the decline may not necessarily reflect just bullish sentiment.

It is “really hard to know what’s happening with just one dimension,” Willy Woo, an independent blockchain data analyst, told CoinDesk. “As the network changes, the measuring stick does along with it.”

Indeed, just as the market started noticing the drop, crypto exchange Kraken, for example, announced last week that the bitcoin balance drop on its exchange was the result of its internal transfers, which immediately damped some of the initial excitement. 

“We can’t confirm that the drop is not entirely due to exchanges’ internal transfers,” Philip Gradwell, chief economist at blockchain data firm Chainalysis, said. “Some are, but not all, and potential withdrawals need to be observed for longer to see if they are genuine withdrawals.

“This makes giving definitive statements on exchange balances far back in the past pretty tricky,” he concluded. “We are working on an improvement to understanding this.”

Clara Medalie, research lead at blockchain data firm Kaiko, said that while it is easy to tell which addresses belong to an exchange, many more entities such as over-the-counter (OTC) desks and brokers associated with the exchanges are receiving lots of bitcoin.

“Thus, it is difficult to actually measure an exchange outflow because these transfers very well could just be being sent to other exchanges or trading desks, or simply between addresses on the same exchange,” Medalie said.

Some argue, however, that by also looking at a few other blockchain data metrics, last week’s drop in bitcoin’s balance on exchanges might still reflect a bullish market sentiment by large.

Woo told CoinDesk that when the drop took place last week, the holdings of the cohorts owning small, medium and large amounts of bitcoin increased, showing some aggressive purchases by both bitcoin whales (large holders) and smaller investors.

As CoinDesk reported, the actual number of BTC available for trading is much lower than bitcoin’s current supply at 18.77 million, or 89% of the 21 million cap, because of increased hoarding by investors and the permanent loss of mined BTC over the years. A decline on BTC’s balance on exchanges and increased BTC balances of holders across their wallet addresses indicate that some of the coins were sold to buyers off the exchanges.

“The largest of the whales may be exchanges that were previously thought of as distinct separate entities, when now we discover in effect they were exchanges all along,” Woo said. “‘Shrimps (bitcoin holders with less than one BTC) to smaller whales all increased their holdings … These guys are unlikely to be exchanges, so it validates most of the coins that left exchanges are real.” 

As data from Glassnode shows, in the past two weeks, the total circulating supply held by entities with different amounts of BTC all increased, with the exception of entities with balances between 100 and 1,000 BTC, and those with balances of more than 100,000 BTC.

“When I see big outflows like this, I think that traders ‘like the price’ and are willing to hold over a longer time period,” George Kaloudis, research associate at CoinDesk, said. “It certainly shows that investors are more willing to weather the storm in the near-term given the friction of moving funds back on exchanges to liquidate.”

The outflows of bitcoin balance on exchanges, based on analysis by Chainalysis, is also a case-by-case situation, an indication that some investors and traders may have changed their preferred platforms for trading and other crypto activities.

As the chart below shows, the drop in the number of bitcoin held on crypto-to-crypto exchanges was much steeper than the drop in bitcoin balances on crypto-to-fiat exchanges since May 1.

“I think much of the bitcoin that has been withdrawn is moving exchanges, as people change which exchanges they trade on,” Gradwell said.

Even though it is not clear what has triggered the change of preferred crypto exchanges by traders and investors, Binance, the most popular crypto exchange by trading volume, has faced tougher regulatory actions in countries around the world.

Bitcoin’s recent outflows from exchanges “was presumably catalyzed by Binance’s announcement of dramatically lower withdrawal limits for non-KYC (know-your-customer) customers,” blockchain research firm Delphi Digital wrote in its daily market update on July 29, which also noted that Binance and Coinbase were the top two exchanges in terms of absolute outflows.

Binance also said that its users in Germany, Italy and the Netherlands won’t be able to open new futures and derivative positions on the platform.

On the other hand, the shift in preference for crypto-to-fiat exchanges also could signal that new investors in crypto are more comfortable with bitcoin investments only, according to CoinDesk’s Kaloudis.

“We are seeing new entrants to the bitcoin market who are presumably less comfortable trading across cryptos in general, [which is] theoretically more bullish for bitcoin adoption,” he said.

The top cryptocurrency by market cap added 12.4% in the seven days through Aug. 1, the most since the final week of April, according to Bitstamp data. It advanced 18.4% in July, snapping a three-month losing streak, and was last changing hands near $40,000.

Data tracked by Glassnode show bitcoin’s illiquid supply, or the balance held by illiquid entities, decoupled from prices in May, signaling renewed holding sentiment. The measure reached a record high 14.447 million over the weekend.

“Amount of bitcoin held by the strongest holders has retraced the whole dump and surged to [all-time high]. This is very bullish,” Lex Moskovski, chief investment officer at Moskovski Capital, tweeted.

The figures show investors are again holding for the long term, or HODLing, reducing the supply of coins available for sale in the market.

Bitcoin supply currently is 18.77 million, or 89% of the 21 million cap. However, according to Glassnode, the actual number of coins available for trading is much lower due to increased hoarding by investors and permanent loss of mined BTC over the years.

While bitcoin moved in tandem with illiquid supply from October 2020 to May 2021, it diverged in mid-May. As the chart shows, the link may now be reestablishing. A similar split occurred for several weeks before bitcoin began its meteoric rise from $10,000 in October 2020. If the illiquid supply continues to rise, a supply-side crisis may emerge, and last price year’s surge may be repeated.

Other blockchain indicators also signal an impending supply squeeze, as tweeted by analysts Willy Woo and Will Clemente.

From a technical analysis perspective, the bull case would strengthen once bitcoin establishes a foothold above a three-month descending trendline.

The trendline hurdle is $42,464 at press time. That’s also the 38.2% Fibonacci retracement of the sell-off from April’s high to May’s low.

Also read: GoldenTree Adds Bitcoin to Its Balance Sheet: Report

Factors like lead times to build out hosting sites, energy and labor costs, tax regimes, climate and political and business environments are among many local issues that make it difficult for miners to map out a specific route of migration, industry pros said. 

While North America is one major destination, Central Asia, Latin America and Europe may be even more serious contenders in the future. Some in the crypto industry will likely welcome this development because it indicates a more decentralized distribution of hash power around the world and potentially assuages fears of Chinese miners having an outsized influence on the Bitcoin network. 

Around 25% of the hashrate that came offline because of China’s crackdown since March will eventually end up in North America, with another 25% going to central Asian countries such as Kazakhstan, Mongolia and parts of Russia, according to estimates by Nick Hansen, CEO of Seattle-based crypto mining firm Luxor. 

Another 15% of hashrate would go to Latin America, 10% could migrate to European Union countries and the rest might never come back online because some of the older mining machines are stranded in China, Hasen said. 

The exact route of the Chinese miners’ migration is still not clear. Hansen’s estimates are in part based on his conversations with miners and a data-based analysis on who has access to suitable power sources and infrastructure to get the miners online in the next six to 12 months. 

“I know the U.S. right now has a lot of energy available, which can be capitalized on, and some of the biggest energy production innovators would want to soak up the capacity,” Hansen said. “But the fact of the matter is they may just not be able to get enough power online to take up as much as they would like, and that’s going to lead these Chinese miners to end up in other places.” 

Lower costs of energy, labor, transportation, tariffs and taxation in central Asia and certain eastern European countries are the main reasons some Chinese miners would choose these regions over North America, said Arthur Lee, CEO of Beijing-based clean-energy mining firm SAI. 

“We think Asia has great potential and it is very strategically important to us,” Lee said. The Bitmain-backed firm plans to reach a fairly big scope in Asia, or even become the first or second largest in the region for the second half of this year, according to Lee. 

The electricity price in central Asia averages at $0.05 per kWh (kilowatt hour) including taxes and other related costs. While mining farms in Texas are within a similar range, other states in the U.S. could have higher prices, said Franky Hu, chief business development officer at MYRIG, a leading mining infrastructure provider in Kazakhstan and Russia. 

Lower energy cost is one of the major factors in determining a miner’s profit margin and how long they can take before covering the cost of their mining machines. An energy cost of $0.05 per kWh can give miners a fairly wide margin given bitcoin’s recent market prices. 

Besides generally cheaper energy, low maintenance cost is another advantage for miners in central Asia. 

“Specialized workers are more expensive in the U.S than Russia and Kazakhstan,” Hu said. “Due to the high labor cost to maintain and repair the machines, many miners in the U.S. would just leave the broken machines.” 

According to Hu, the depreciation rate of mining rigs ranges from 1% to 5% on a monthly basis depending on local weather conditions. Texas generally has a hot and humid climate, which could cause more issues for mining machines. 

The U.S. comes with other costs as well. The 25% tariffs on Chinese imports, including electronic components, from the Donald Trump era remain intact under Joe Biden’s administration. The Internal Revenue Service (IRS) taxes crypto generated through mining the same way it taxes income, which ranges from 10% to 37% depending on the state, according to the agency’s guidance on crypto mining taxes. 

More expensive building materials and a stricter electrical code, the standard for the safe installation of electric wiring and equipment, for the hosting sites in North America could also make crypto mining more costly in the region, said Kevin Zhang, vice president of mining firm Foundry. (Foundry is a subsidiary of Digital Currency Group, which is also CoinDesk’s parent company.) 

Cost can still be an issue even in crypto mining-friendly states with rich energy sources.  

“We have looked at both Kentucky and Wyoming and, unfortunately, we have not seen the power and the energy cost at the point where we feel comfortable about it,” said Dave Perrill, CEO and founder of Minneapolis-based miner hosting services provider Compute North. 

“I think we are one of the low-cost providers in the industry. We are very thoughtful and strategic and very picky in regards to where we source and how we source our energy. Just the tax ramifications alone wouldn’t foot the calculus in its favor,” Perrill said. 

While Kazakhstan, one of the largest bitcoin (BTC, -2.7%) mining hubs in central Asia, recently ended financial incentives meant to attract bitcoin miners and imposed a tax on electricity used by mining operations, Lee said it is very unlikely miners can reduce their cost in North America to be as low as it is in central Asia. 

Another major factor for the migration of Chinese miners is how quickly they can build new hosting sites to run mining machines, given that the vast majority of existing hosting sites are already at full capacity due to bitcoin’s high price. 

The bottleneck in this industry has shifted from machine procurement and manufacturing, which faced a supply chain crunch caused by the coronavirus pandemic, to infrastructure, Zhang said. When 50% of hosting capacity is shut off over the course of a few months, the supply for new host sites is greatly in demand. 

China’s crackdown on mining has caused a sharp drop in bitcoin mining difficulty, creating an opportunity for miners to mine more bitcoins using the same amount of resources. Miners in the rest of the world are scrambling to build new sites to operate more machines, while the profit margin is wide due to this drop in difficulty.  

“The difficulty level will return to the level before China’s crackdown in 12 months [at] the latest if not sooner,” Hansan said. “The difficulty would probably break the previous all time high given how much more capacity there will be.” 

Local construction teams, regulators’ requirement for mining infrastructure and the long distance from China are the reasons leading to a longer lead time to build out hosting sites in North America than central Asia. 

“Construction teams in Asia are generally very efficient and they can complete projects in a short period of time,” Lee said. “That makes the process very fast and shortens the cycles.” 

There are another two factors that could slow the construction process, according to Zhang: the permitting process and building materials required for mining sites in the U.S. 

“Transformers and electrical infrastructures in the U.S. tend to be built out of copper, which is facing a supply crunch, whereas in China and Kazakstan the transformers there are built out of aluminum,” Zhang said. “So the lead time there is shorter.” 

Hu said the average transportation time from China to Kazakhstan or Russia would be around two weeks, whereas it could take about seven weeks to ship mining machines across the ocean to the U.S., according to Perrill. 

Russia and the Commonwealth of Independent States (CIS) countries, including central Asian crypto mining hubs such as Kazakhstan, Kyrgyzstan and Georgia, are goegraphically closer to China, said Igor Runets, CEO of Russia-based miner hosting services provider BitRiver. 

“Furthermore, there are extra tariffs on the importation of mining machines from China to North America because of the ongoing trade war and other bilateral tensions,” Runets said. “This makes shipping machines from China to Russia or other CIS countries much easier, cheaper and sometimes even faster than shipping them from China to North America.” 

This is not to say that North America is out of the equation. Some Chinese miners choose the U.S. and Canada for their crypto-friendly regulations, political climate and a business environment where stakeholders are held accountable. 

“The most desirable places that many of these Chinese miners are moving to are in North America,” Zhang said. “A lot of miners have been looking at Texas and other parts of the US, where it is very friendly towards crypto and bitcoin mining.” 

According to the National Review, 25 states are going to introduce blockchain and virtual currency-related laws in their 2021 legislative sessions. 

Texas Governor Greg Abbott signed the Texas Virtual Currency Bill into law in June, providing a clear legal framework for blockchain and cryptocurrencies. U.S. Sen. Cynthia Lummis (R-Wyo.) claims bitcoin mining rigs are hooking stranded natural gas up to bitcoin miners, redirecting fossil fuel. Kentucky Governor Andy Beshear signed a bitcoin incentive bill in March to give tax breaks for the miners in the state. 

Other high-profile politicians in the U.S. are also warming up to bitcoin mining. Miami Mayor Francis Suarez said the city should become a bitcoin mining hub based on its rich nuclear power. Eric Adams, who will likely be the next mayor of New York City, pledged to make New York City a bitcoin center during a campaign speech. 

This stable business environment with a clear legal framework is another reason why Chinese miners are coming to North America. 

“In the western hemisphere, you have a much more stable legal system,” Zhang said. “Who has recourse and what expectations are all contractually bound and it is enforceable in court.” Bitcoin mining and cryptocurrency is already in a very gray area in China, where legally binding hosting contracts often do not exist, according to Zhang. 

Of course, not all states are ready to welcome bitcoin mining businesses. Some states, including New York, Washington and Montana, have more restrictive regulations or bills on bitcoin mining.  

While low costs and shorter lead times in central Asia have attracted many Chinese miners, miners might face similar challenges as they did back home. 

“Central Asia is very similar to China in terms of how hosting sites are built,” Zhang said. “In China, they are racing to pay back their miners [within] six to nine months because the machines would not last that much longer due to exposure to the containment in the air, the filters are not as good and the overall quality of the facilities are not as good as well.”  

Handshake agreements, as opposed to formal contracts, are more common in central Asia than North America and the lack of legal clarity and recourse could make the miners’ assets less secure, according to Zhang. 

However, that might be changing, according to Lee. 

“I think we have a bias against these countries,” Lee said. “While the regulatory and business environment in central Asia and the Middle East is not as developed as North America, it is gradually getting better.” 

These countries are also competitive in terms of power supply.  

“While these countries seem to have fairly small energy supply, their energy consumption is small as well, so they have an energy surplus,” Lee said.

According to Hasen’s estimates, there would be another 15% of hash power migration to Latin America from China, with resurgences in Venezuela and Paraguay. 

“We are promoting the Latin American mining industry because it is a gem for miners,” said Theodoro Araujo, CEO of Venezuela-based crypto mining firm DoctorMiner. “Venezuela is like a paradise for mining.”  

Electricity prices offered by the firm’s hosting sites can be as low as $0.04 kWh including all related costs and profit sharing with the miners, which makes mining operations fairly profitable given the current bitcoin price, according to Araujo.  

Abundant hydropower and an ongoing economic crisis in Venezuela have contributed to the relatively low energy cost. 

The Guri Dam in Venezuela, which is one of the largest dams in the world, has an installed capacity of over 10 gigawatts (GW), while the country is among the nations that have the highest oil and gas reserves. 

Many factories and warehouses near the dam are paralyzed due to the economic crisis in the country, which enables use of some of that infrastructure at a low cost, Araujo said. 

Araujo claimed it would take one and a half months to install a capacity of 2 MW, which is fast for many miners. Doctorminer is considering bringing Chinese engineers and specialized workers to Venezuela and further shorten the lead time, given that it is not hard to get work permits for these workers in the country. 

The firm now has 15 MW capacity and aims to reach 50 MW by the end of 2022. It plans to work with some miners in Paraguay for the expansion, where it has another huge dam, Itaipu, shared with its neighboring country Brazil. 

Paraguayan congressman Carlos Rejala introduced a bill to attract international mining companies and other crypto businesses in July. If passed, it would allow crypto companies, including bitcoin miners, to finance their operations with cryptocurrencies in the country, remit dividends abroad and capitalize on their profits in local banks.  

El Salvador’s president, Nayib Bukele, has directed the country’s state-run geothermal plants to let bitcoin miners plug into its volcanic resources.  

However, one of the biggest challenges for some of these Latin American countries in attracting international clients, including Chinese miners, is its unstable political and business environment. 

Guri Dam, which contributes to over 80% of Venezuela’s electricity production, has been at the center of controversy since 16 states in the country suffered a four-day blackout in March 2019. The long recovery exposed the dam’s decade-long mismanagement and corruption within the related authorities that supervise operations of the dam. 

Historically, Venezuela has suffered bouts of severe and persistent drought in part due to climate change, which drastically reduced hydroelectricity and made the country ration electricity in certain states. 

The bottom line is that there may simply be no one, obvious destination for Chinese miners. “Diversification is going to be a driving force,” Hansen said. “It won’t all go to one area.” 

There is no clear data in terms of where the Chinese miners are actually settling down for now, and money is yet to start changing hands, according to Jaime Leverton, CEO of Alberta-based mining company Hut 8. 

“I think everybody is speculating and it is all based on the in-bound demand we are hearing from various geographies,” Leverton said. “But until transactions are taking place and things start lighting up, it is really impossible to say.”  

UPDATE (Aug. 2, 2021, 18:20 UTC): Corrects the spelling of “Kazakhstan.”