Subsidized Energy And Shrinking Economy Lead To Bitcoin Mining Boom In Argentina
Low energy costs, high inflation and restrictive capital controls have pushed residents of Argentina to mine bitcoin in their homes.
Bitcoin miners in Argentina are taking advantage of the country’s shrinking economy and its debased currency to harvest oversized returns, powered by cheap, government-subsidized energy, Bloomberg reported.
“Even after Bitcoin’s price correction, the cost of electricity for anyone mining from their house is still a fraction of the total revenue generated,” Nicolas Bourbon, who has experience mining bitcoin from Buenos Aires, told Bloomberg.
Miners are capitalizing on Argentina’s cheap residential electricity due to intense government subsidies that seek to win political points with voters.
“The crypto that miners generate is typically sold at the parallel exchange rate, but the energy is paid for at a subsidized rate,” explained Bourbon. “At the moment, revenues are very high.”
The bitcoin parallel exchange rate in the country is selling at a hefty premium, as Argentines have substantial currency restrictions imposed on them and desperately seek better stores of value than their fiat currency –– the peso. According to Bloomberg, bitcoin’s parallel exchange rate in the country traded at around $63,000 on Sunday, a 75% premium to the official rate of $36,000.
Apart from local Argentine homeowners, international mining firms are also taking action to benefit from the situation. Last month, Canada’s Bitfarms Ltd. secured a deal to draw 210 megawatts of power from an underused Argentinian natural gas plant, per Bloomberg.
“We were looking for places that have overbuilt their electrical generation systems,” Bitfarms President Geoffrey Morphy told Bloomberg. “Economic activity in Argentina is down, and power is not being fully utilized. So it was a win-win situation.”
Although electricity in Argentina is much cheaper than in its neighboring countries, the home mining trend is starting to pick up in South America. For example, in Brazil, bitcoin mining interest has reached a three-year high, according to data from Google Trends, local outlet Portal Do Bitcoin recently reported. Growing unemployment, a shrinking economy and a devalued currency since the pandemic breakout have left Brazilians seeking alternative income sources by mining bitcoin at home.
As a permissionless, government-agnostic, decentralized money, bitcoin is providing an alternative to people under interventionist governments’ monetary policies around the world.