Bit Digital Cashes in on Chinese Mining Exodus

Many mining firms are moving operations from China to North America, after Beijing banned bitcoin mining last month, according to companies like Bit Digital, a large-scale bitcoin mining company.

In May, Beijing called for a crackdown on China’s crypto mining industry, which was home to over 65% of global mining capacity. According to reports, more than 90% of China’s bitcoin mining capacity is expected to close, just weeks after the ban in China’s Qinghai province was announced. 

While bitcoin has been banned in China for some time now, a number of technology and internet trade groups issued a statement in May reaffirming their support for the ban and declaring that the ban was inclusive of relatively new domains in the industry like DeFi, Blockworks reported. 

Still, the “great mining migration” out of China has become a decentralizing force and drive in moving a sizable portion of mining companies to North America in search of new homes for mining facilities. 

Although there are a number of reports of miners from China fleeing to the US to re-establish their hashing presence, there’s no indication that they’ve set up shop stateside — only shipped the gear there, Blockworks reported, as there’s yet to be a material increase in the global hash rate. 

During the 2021 Sequire Blockchain Conference, Bit Digital CEO Bryan Bullett said the company has accelerated its migration strategy to North America, which is a part of its ongoing efforts since October 2020. Bit Digital owns about 32,000 machines and shipped 14,500 miners to the US during the second quarter of 2021, making it the company’s largest quarterly shipment to date, he said. 

Bit Digital has an advantage over other mining companies, thanks to its strategy to form logistical channels and hosting relationships, which allowed it to accelerate the company’s process of moving its mining operations out of China, Bullett said. 

But other operating mining businesses have not had the same luck in their own great migration out of the Asian country. Some mining businesses “were not so fortunate, and were faced with little choice but to exit the business, and attempt to sell equipment en masse, according to industry sources,” Bullett said. 

“This has led to an historic disruption in the market price for miners. Such equipment is believed to be flowing onto the spot market in extraordinary volumes, as formerly China-based operators seek to exit,”  he added. 

But as the market begins to face new terrain on North American soil, Bit Digital sees this moment as a growth opportunity to acquire miners at scale and potentially increase its asset base rapidly. 

The company purchased 3,515 miners on the spot market during the second quarter and expects to purchase more by the end of the third quarter, it said in a statement.

The company is the only US-listed miner with both a primary US-based management team, operations and hosting relationships and deep relationships with major former Chinese operators, Bullett said. This gives them an advantage and access to both US and Chinese markets. 

“We can serve as a bridge from the disrupted Chinese market, into North America, and by doing so potentially grow our fleet size and hash rate materially, subject of course to market conditions and capital availability,” he said. 

Bit Digital signed two new hosting agreements in North America, for a total of 60 megawatts of additional power capacity to complete the migration of its fleet in full. “We anticipate finishing the migration during the third quarter of 2021, and intend to provide ongoing progress updates to the market,” Bullett added. 

The company also has a hosting partnership in Alberta, Canada with a company that develops mining sites on natural gas wells to repurpose waste gas for mining “and providing otherwise-wasted power to the bitcoin network by hosting our miners,” he said. 

“We are a global organization,” Bullet said. “While our company’s origins are in China, we’ve been transitioning our leadership, operations, and miners to North America, to provide greater transparency and access to the stable regulatory environment here.”