Bitcoin Mining Disrupted by U.S. Cold Wave as Power Demand Surges [Bitcoin Now]

Bitcoin Mining Output Plummets Amid Record Cold Wave
Hash Rates Drop Sharply at U.S. Miners "FoundryUSA" and "Luxor"
Bloomberg: "Overseas Companies Expected to Benefit"

Bitcoin mining companies in the United States are seeing a decrease in mining output due to the nationwide cold wave. The surge in electricity demand appears to have prompted mining companies to scale back their operations.

Reuters Yonhap News

According to MiningPoolStats, a mining pool statistics site, the hash rate of FoundryUSA, a U.S.-based Bitcoin mining company, dropped from 300 EH/s (exahashes per second) on January 23 to around 200 EH/s on January 27. Similarly, Luxor's hash rate fell from 40 EH/s to 20 EH/s.

The hash rate refers to the computational power used to process transactions on the Bitcoin blockchain. A higher figure indicates that more mining machines are operating, while a lower figure means the number of active machines has decreased accordingly.

This decline is believed to be the result of the recent cold wave that swept across the United States. The extreme cold has caused a sharp increase in heating-related electricity demand, putting additional strain on industrial power supplies. As electricity demand and energy prices have risen, mining profitability has deteriorated, leading some mining companies to reduce or temporarily halt operations in order to ease the burden on the power grid.

Ethan Vera, Chief Operating Officer (COO) of Seattle-based Luxor, told Bloomberg, "Advanced Bitcoin mining companies are adjusting their mining machine operating speeds on a second-by-second basis, taking into account electricity prices, grid compensation, and mining profits." Bloomberg also reported that as U.S. mining companies scale back operations, overseas miners appear to be benefiting from reduced competition.

Additionally, on January 26 (local time), Oregon-based Bitcoin mining company Abundant Mines stated on X (formerly Twitter), "The most likely cause is the winter storm that hit Texas and the southeastern United States." The company explained, "These regions account for a significant portion of Bitcoin mining in the U.S., and many mining companies have suspended operations due to power outages and voluntary measures to stabilize the power grid."

The market believes that the decline in hash rate is partly due to reduced mining profitability following Bitcoin price corrections. According to blockchain analytics platform CryptoQuant, the price of Bitcoin fell from $93,651 on January 6 to $88,284 on January 26. During the same period, the hash rate decreased from 958 EH/s to 873 EH/s.

The recent weakness in Bitcoin prices is seen as the result of multiple factors, including the possibility of a U.S. federal government shutdown, delays in the passage of the 'Clarity' bill, which aims to regulate the virtual asset market structure, and global geopolitical uncertainties. On top of this, the increased burden of electricity costs due to the cold wave has also led some mining companies to reduce operations, which in turn has contributed to the decline in hash rate.

Industry experts are also noting that this decline in hash rate could increase short-term volatility in Bitcoin prices. Abundant Mines explained, "A sharp fluctuation in hash rate can lead to greater price volatility."

The United States is considered the largest Bitcoin mining hub in the world. It became the leading mining location after mining activities in China were restricted by government regulations.