Texas Emerges as Cryptocurrency Mining Hub
Texas has become a prominent hub for cryptocurrency mining, with the state accounting for 28.50% of the total hashrate in the United States as of July 2023. Data from Foundry, the largest mining pool in North America, reveals that Texas has solidified its position as the “crypto capital” of the US, leading in terms of the collective hashrate of the Bitcoin (BTC) network.
The mining pool reported that Texas represented 8.43% of the hashrate in the US by the end of 2021, a percentage that has now surged to 28.50% as of July 27, 2023. However, Kevin Zhang, Senior Vice President of Mining Strategy at Foundry, notes that the displayed data is aggregated and the actual percentage of hashrate in Texas is even higher than what is reflected.
This rise in Texas’s hashrate has come at the expense of other miner-friendly states such as Georgia, which saw its share of the US hashrate decline from 34.17% to 9.64% over the last two years. Despite offering competitive electricity pricing and access to renewable power sources like solar energy, Georgia has experienced a decline in its mining operations due to the exponential growth of mining activities in Texas.
Similarly, New York witnessed a plunge in its hashrate from 9.53% in 2021 to 8.75%. However, states like New Hampshire and Pennsylvania saw a significant spike in their shares of the US hashrate.
One of the factors that make Texas attractive for cryptocurrency mining is the increase in negative pricing, which refers to instances where electricity prices drop below zero. Researchers have observed a surge in negative pricing, accounting for over 6% of all hours in 2022 in wholesale markets throughout the country. This phenomenon offers an advantage to Bitcoin miners, as they can purchase power at a negative price, reducing their overall operational costs.
Bitcoin mining engineer Brandon Arvanaghi describes this situation as a “win-win” scenario, where miners can pay slightly more than what they would have earned mining for Bitcoin during those hours.
Several key players in the cryptocurrency mining industry have expanded their operations in Texas. Riot Platforms, a Bitcoin mining and data center, experienced a landmark month in August 2023, setting a new monthly record for Power and Demand Response Credits, totaling $31.7 million. These credits significantly lower Riot’s mining costs, making the company one of the lowest-cost producers of Bitcoin in the industry.
Cipher Mining, another prominent player, purchased 11,000 new mining rigs for its facility in Texas in May, further solidifying the state’s position as a preferred destination for cryptocurrency miners.
Following China’s ban on mining in 2021, many crypto miners relocated their operations to Texas. The state’s power grid, known as “ERCOT” (Electric Reliability Council of Texas), offers credits to companies that generate additional revenue on top of the rewards they earn from Bitcoin transaction verifications. This incentive has attracted mining giants like Riot, Core Scientific, Genesis Digital Assets, and Marathon Digital to set up their operations in Texas.
With its favorable conditions, including abundant renewable energy sources, miner-friendly policies, and a resilient power grid, Texas has established itself as a dominant player in the cryptocurrency mining industry, making it an ideal destination for both existing and new mining ventures.
