• Two of the major US miners are mining bitcoin at a considerable discount, according to research from Compass Point
  • One stakeholder in the North American mining industry told Blockworks that he’s yet to see inbound movement to the US from fleeing Chinese miners

The bitcoin price crash of 2021 won’t have the same impact on the mining industry as the crash of 2018 as two of the largest miners in North America are well-positioned to weather the storm. 

According to a recent note by Compass Point’s Michael Del Grosso, the firm believes that Riot Blockchain (RIOT) is mining bitcoin at a cost equivalent to approximately $15,000 per bitcoin or a 62% discount to market pricing.

One of its competitors, Marathon Digital (MARA), is mining at a cost of approximately $12,000 per bitcoin, or a 70% discount. 

“We believe North American miners are well-positioned to benefit both from the lower global hashrate and the potential for increased availability of mining equipment,” analyst Del Grosso wrote in the note. “In the case of Riot, the firm’s recent acquisition of Whinstone should provide the miner with significant hosting capacity ready to bring on Chinese miners looking to move their operations to North America.”

A buy rating for North American mining firms

The firm’s modelling that a prolonged decline in global hashrate — from operations in China packing up and moving abroad — as well as continued price compression is not an issue for either company given their scale. The longer that China’s collective hashrate declines means it’s easier for miners that are established and operating at full capacity to mine, and neither Riot nor Marathon are overly impacted by price sensitivity. 

Compass Point gives both Riot and Marathon a buy rating. The firm also notes “should a Bitcoin ETF be approved, Bitcoin miner stocks may experience a decoupling from the movement in Bitcoin price and potentially see more fundamentally-driven performance.”

This is in contrast to the price crash of 2018, where bitcoin mining companies spent a considerable amount of capital upgrading their capacity to capitalize on the bull market of 2017, which ended with the price of bitcoin falling by about 65% from January 6, 2018, to February 6, 2018.

At the time, mining rigs were being sold for scrap metal by the kilo, some of the first US-based bitcoin miners declared bankruptcy, and Taiwan-based graphics cards manufacturers like Asus and Gigabyte were forced to take expensive write-downs as the market for GPU mining cratered. 

Where are the Chinese miners?

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. 

Steve Braverman, president and CEO of Massena, New York-based Dignity Mining Group, told Blockworks that if these firms are going to establish operations in the US, it’s been “very quiet.”

“There has been very little movement regarding Chinese mining firms. Our colocation facilities are already maxed out,” he said. “There has been very little supply [of ASICs computer chips used by miners], and as you may be aware, most of the rigs come from China. The cost of the rigs has not gone down significantly either. If China miners are moving in, it is not to the US. There are many other friendly countries with low green power costs and are crypto-friendly.”

According to Blockchain.com’s hashrate monitoring tool, the global hash rate has stopped its decline from the prolonged drop that began in early June, but it hasn’t yet increased. So wherever these miners are going, they’ve yet to turn on their machines.

  • Blockworks
    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.