Bitcoin Miners’ High Hopes for Latin America Denied by Paraguay
The promise of Latin America as the future of crypto mining was dampened by the news that Paraguay will not put a cap on the price of electricity for the industry.
At the World Digital Mining Summit in Cancun, Mexico, last month, Bitmain, the world’s largest bitcoin mining rig manufacturer and host of the conference, singled out Latin America, particularly Paraguay and Argentina, as promising countries for mining. About a quarter of the conference was dedicated to the theme “Latin America: Unlimited Potential Blockchain Land.”
Read more: Paraguay votes down crypto regulation bill in a blow to the crypto mining industry
Argentina’s BitPatagonia and Paraguay’s Penguin Digital were invited to present, while Yiding (Fred) He, Bitmain’s director of business development, spoke about the region’s potential, although he warned that it is important to find the right partner to work with in Latin America .
Bitmain itself is looking at opportunities in the region, as are many other large firms.
The availability of cheap electricity in Europe, North America and former Soviet countries has dried up this year, partly because inflation and the war in Ukraine are driving up energy prices and partly because regulators and grids are slowing mining as they assess the effects it is having on their communities.
Read more: Canada’s Manitoba province enacts 18-month moratorium on new crypto mining
As a result, companies looked to Latin America, a region that still has untapped energy potential. Paraguay in particular has a relatively low price of less than five cents per kilowatt hour (kWh) and as low as 35 cents. Many industrial miners in the US face prices above that.
But Paraguay’s national grid operator and the government have asked miners to pay as much as 60% above the industrial rate for electricity. A bill to stop that plan was voted down in the Paraguayan legislature on December 6, meaning the miners’ margins will be far thinner than they had previously calculated.
Meanwhile, high energy prices have already thinned miners’ margins around the world, leading to some high-profile liquidity crises.
The infected
At past conferences held in exotic locations, attendees often met in the pool, or at least by the pool, and took time to catch up before getting down to business. But this time the meetings were far more serious, with miners bringing printed financial presentations to now conscientious financiers, one attendee said.
The mining industry has been hit hard by the crypto winter. Miners’ direct exposure to failing companies like bankrupt crypto exchange FTX appears to be minimal and mostly through intermediary companies like crypto lender bankrupt BlockFi and others. (That’s with the exception of Celsius Network, a bankrupt lender that ran a mining arm.) But they’ve felt the effects of the crypto winter as much as anyone. Miners’ incomes have fallen massively, along with the price of bitcoin (BTC), while energy prices have skyrocketed.
Major companies in the mining industry such as Compute North and Core Scientific (CORZ) have been hit, along with smaller firms facing higher energy prices. Few, like CleanSpark (CLSK), have been in a position to take advantage of the situation to buy distressed assets.
During the last dinner in Cancun, closed to most attendees of the event, Micree Zhan, co-founder and chairman of Bitmain, unveiled the price of a special batch of new S19 XP Hyd. mining machines. The price was planned to be $19 per terahash (TH). But Zhan, speaking in a hoarse voice, decided on the spot to lower it to $18.5/TH in light of the revelations about FTX and how the market reacted. (Terahash is a measure of computing power.)
Read more: Bitcoin Miners’ FTX Contagion Exposure May Amplify Industry Pain
