The Vice-Chair of the European Securities and Markets Authority, Erik Thedéen, recently proposed a ban on proof-of-work mining in the EU. He stated, citing its influence on Sweden,

"It would be ironic if the wind power generated along Sweden's extensive coastline was used to mine Bitcoin."

Regulators assess the impact of mining.

Previously, Norwegian officials expressed similar concerns about crypto-mining that uses a large proportion of renewable energy.

While more miners are switching to renewable energy, it is obvious that they are still failing to address energy challenges in many parts of the world. Several countries, including Russia, Kazakhstan, and Kosovo, suffered energy-related upheaval in 2021 and early 2022. At the same time, electricity consumption for crypto-mining was increasing. So much so that Russia is apparently considering a mining ban as well.

Last year, China made a similar legislative move to ban Bitcoin mining, displacing nearly 70% of the world's miners.

According to CBECI estimates, Russia's move will affect more than 11% of the worldwide hashrate.

Gavin Qu, VP of Operations of crypto-mining business PrimeBlock, stated AMBCrypto in this context,

"There has been a significant decline in the network hashrate as a result of power grid strain, internet failures, and bitcoin mining bans."

He went on to say that Kazakhstan formerly controlled an estimated 18% of the overall Bitcoin hashrate. According to Qu, this is the cause of the January decline. He stated,

"And, if we compute the decline from 207EH to 168 EH in early January, we get an 18% fall, which accounts for the outages in Kazakhstan."

While the executive anticipates future swings in Bitcoin's hashrate, he also anticipates a speedy rebound.

The effect on its price

What is significant in this case is the effect of these hashrate swings on Bitcoin's price. Intel recently revealed that their Bitcoin mining chip will be unveiled at a conference in February 2022. According to Marcus Sotiriou, an analyst at UK-based digital asset broker GlobalBlock, the prospect of an effective BTC mining infrastructure may enhance the token's valuation. He stated,

"Intel's system intends to lower overall power consumption by about 15%." Because environmental friendliness is one of their top concerns, this rise in energy efficiency will encourage more institutional investors to enter the area."

This is essentially a positive indicator for the BTC hashrate and, as a result, its price. However, if Bitcoin's price falls to a new low, Qu believes that small miners may struggle to exist since they will be unable to compete with major mining businesses.

At the time of publication, BTC was still hunting for fresh levels to name its bottom, with the cryptocurrency trading just around $36,000, down nearly 50% from its November peak.

What will the size of the mining industry be in 2022?

Qu estimates that the worldwide Bitcoin mining sector is valued more over $14 billion at current market rates. He continued,

"Gross margins for big scale mining businesses are between 75 and 85 percent."

This means that the sector remains profitable for large players. It's worth noting that the executive stated that the nett profitability of mining operations is determined by various factors, including the cost of capital, the depreciation of capital equipment, the cost of power, and miner efficiency. He went on to say,

"As with other emerging industries, horizontal – and vertical – consolidation is probable in the face of constant competition between small and larger miners..."

Indeed, a North American mining company official stated that their "goal is to focus on sites with a surplus of electricity and advantageous space, cost, and regulatory conditions."

That's an intriguing point of view, especially given what Argo CEO Peter Wall said about mining profitability not long ago.

"BTC Mining It will most likely be less profitable in 2022 than it was in 2021."

Surprisingly, crypto-mining has taken centre stage in American politics. Senator Elizabeth Warren, for example, recently challenged cryptocurrency miners to acknowledge the impact on the environment.

Brian Brooks, the Chief Executive Officer of BitFury, testified before a Congressional committee in defence, saying,

"As a result, it is critical that Bitcoin not be judged only on how much energy it consumes, but rather on its energy mix relative to other energy users in the economy and on the incentives bitcoin generates for building a more sustainable energy mix."

Support us!