Argentine Bitcoin miners profit from cheap electricity

Bitcoin miners in Argentina are taking advantage of the country’s contracting economy, fed by memories of currency busts and powered by cheap government-subsidized electricity.

As we know, numerous countries have experienced booms in crypto mining this year. Notably, ultra-low utility rates and the resurgence of capital controls help supercharge profits for miners in the South American nation.

According to Nicolas Bourbon, who has experience mining digital currencies from Buenos Aires, even after Bitcoin’s price correction, the price of electricity for anyone mining from their house is still a fraction of the total revenue generated.

Cryptocurrencies have long been trumpeted in Argentina as a way for locals to hedge against cyclical economic crises, such as repeat currency devaluations, defaults, hyperinflation, and now, a three-year recession made worse by the pandemic.

Additionally, the return of foreign-exchange controls in the last years have given Argentines banned from buying dollars even more incentive to mine digital tokens. Notably, rising demand for non-peso assets has propelled the value of Bitcoin skyrocketing to about 5.9 million pesos in unofficial markets as of May 31, versus around 3.4 million pesos at the official rate. Miners benefit from the country’s longstanding residential electricity subsidies.

Mining in Argentina will be profitable as long as the government foots the electricity bill

According to Ezequiel Fernandez, an analyst at Balanz Capital Valores in Buenos Aires, despite Argentina being a net importer of gas, consumer electricity bills are only around 2% to 3% of an average monthly income.

Moreover, as inflation is running at around 50% annually and currency restriction permitting individuals to legally convert just $200 per month, rampant demand for any store of value is fueling a fall in the peso in parallel markets, where it’s now around 70% weaker than the official rate.

Despite Bitcoin’s volatility in the following months, mining in Argentina will almost certainly remain profitable for people as long as the government is footing at least part of the electricity bill.