Simply put
- North American Bitcoin mining pools experienced a decrease in their share of blocks last year.
- This shift is largely influenced by the rising demand for AI infrastructure.
- China’s expansion in energy production may also play a role in this trend.
Despite former President Trump’s vision for American dominance in technology, the U.S. is losing its footing in Bitcoin mining as companies pivot toward AI infrastructure, thus opening opportunities for nations like China.
A recent analysis indicated that by 2025, North American mining pools—where miners band together to enhance their chances of earning Bitcoin—will consistently lose block share, which is the percentage of total Bitcoin blocks mined successfully.
As of December, the report from BlocksBridge revealed that Foundry USA, MARA Pool, and Luxor Technologies combined accounted for 35% of all Bitcoin blocks, a drop from over 40% in January of the previous year.
The decline coincided with Trump’s call for all remaining Bitcoin to be mined in the U.S. by 2024, a goal some see as unrealistic. Still, this reflects a broader vision for a thriving industry that has faced criticism for its potential long-term environmental and community impacts.
Additionally, Trump’s sons are advancing their own Bitcoin mining venture, American Bitcoin. This comes as numerous states in the U.S. see rapid growth in data centers, with Eric Trump Jr. and Donald Trump Jr. having co-founded the company last March, with Miami-based Hut8 holding an 80% stake.
Interestingly, Hut 8 has shifted focus from Bitcoin mining to operate more as an energy infrastructure firm, recently announcing a partnership with AI company Anthropic to build the infrastructure for a large U.S. data center.
Just a month ago, Eric Trump visited their Texas-based mining facility and shared a video online, showcasing how the company is currently mining about 2% of the global Bitcoin supply, while 35,000 machines were operating in the background.
Bitcoin mining involves specialized computers solving intricate calculations to verify transactions and secure the network in exchange for newly minted Bitcoin. Over time, many companies have experienced diminishing profit margins.
A recent report from JPMorgan stated that the average daily revenue for Bitcoin miners in December was significantly lower, down 32% year-on-year, reaching $38,700 per exahash per second. This decline illustrates how Bitcoin mining’s profitability has dipped to new lows due to rising energy costs.
Nick Hansen, CEO of Luxor Technology, noted that the decreasing profitability is steering companies to consider the needs of AI as part of their strategy. He emphasized that all Bitcoin miners need to assess how AI could fit into their current power operations, given that the demand for AI is exponentially larger than that for Bitcoin mining.
Meanwhile, China’s power generation is expanding swiftly. This decrease in North America’s block share reflects not just a retreat by American companies but also highlights the energy issues within the U.S.
Citing the potential to harness Bitcoin mining to revamp domestic energy systems, Hansen observed that China’s energy surplus allows it to compete effectively for Bitcoin blocks.
Movement in Xinjiang
In recent years, Bitcoin miners have been caught in a competitive scramble, but this dynamic is shifting, according to Wolfie Chao, director of research at a relevant institute. This possibly creates openings for countries like China.
Chao pointed out that many publicly traded miners have slowed their hash rate expansion, and some have even reduced their Bitcoin mining power. Hashrate represents the computational resources allocated to the Bitcoin network.
Notably, despite an official ban on Bitcoin mining in China since 2021, Chao indicated that Xinjiang province has seen a rebound in hash rate. However, recent reports suggest increased surveillance in the area.
Xinjiang’s geographical dispersion means it can generate substantial electricity from fossil fuels, and although the exact scale of operations remains unclear, some residents are defying restrictions, taking risks to mine Bitcoin due to the province’s distance from Beijing.
Chao affirmed that mining activities continue in Xinjiang and noted that shifts in hash rates are also influenced by developments in the Middle East and Russia.
Last year, he mentioned that firms manufacturing Bitcoin mining equipment, like Bitmain, faced tough market conditions as demand waned. To offset revenue losses, these companies found it necessary to mine Bitcoin themselves.
He mentioned that these companies were compelled to utilize their stock and link machines to various locations, likely across the U.S., Middle East, and Central Asia.
A dominant player in the Bitcoin mining market, Bitmain could face challenges from suppliers like Taiwan’s TSMC if they choose to cut back on production.
Chao observed an oversupply situation, adding that not many companies are purchasing at previous rates.
