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(Kitco News) – Bitcoin (BTC) has once again been thrust into the spotlight of financial markets thanks to multiple spot BTC exchange-traded fund (ETF) applications being filed by some of the world’s largest asset managers, including BlackRock and Fidelity, but its price continues to struggle to overcome resistance at $31,500.
While bulls fight to push its price higher, one area of the Bitcoin ecosystem that is firing on all cylinders is the mining sector, which continues to strengthen as evidenced by the recent all-time highs in hash rate and mining difficulty.
According to data provided by Bitinfocharts, the hash rate for the Bitcoin network hit a new record high of 465.015 exahashes on July 8, while data from CoinWarz shows Bitcoin mining difficulty is currently at an all-time high of 53.91 trillion exahashes.
To get more insight into the current state of Bitcoin mining, Kitco Crypto spoke with Phil Harvey, Founder and CEO of Sabre56, a leading hosting provider and digital asset mining consultancy firm that recently announced a deal with Arkon Energy to consult on the Australian data center infrastructure provider’s newly acquired data center in Hannibal, Ohio.
While many in the crypto industry would like to memory-hole the events of the past two years, Harvey said they were “a transformative period for the Bitcoin mining industry” despite the fallout from the FTX collapse, which he said “amplified the cooling commonly observed after the bull run in crypto markets.”
“The industry is maturing and consolidating as professional players and institutional money enters the market,” he said. “The crypto winter accelerated this trend by weeding out unsustainable operations. The casualties were miners such as Core Scientific, Compute North and Celsius, who had bought overpriced machines during the bull run and over-promised on facility delivery.”
The companies that remain had “well-planned crypto mining operations,” which helped provide a buffer to “short- and mid-term Bitcoin price fluctuations,” he said. Sabre56, for example, has mining profitability data dating back to 2013 that shows “revenue is remarkably constant over cycles.”
“Mining players who are in it for the long haul and being reasonably capitalized did not stop their expansion during the crypto winter, quite the opposite,” he added.
Sabre56 is currently focused on building its own hosting facilities across Wyoming, Ohio, and Texas, and Sabre56 has the goal of “professionalizing the Bitcoin mining industry wherever it can,” he said.
Optimism in the mining industry
When it comes to sentiment within the U.S. Bitcoin mining industry, Harvey said there is a lot of optimism due to the rapid pace of progress. “Fortunately, the regulatory skirmishes between the SEC and Binance, Coinbase, and several other crypto companies do not overly impact the mining industry because it relies overwhelmingly on Bitcoin mining,” he noted.
“If anything, Bitcoin has been strengthened by the woes in other quarters of the crypto economy, since its status as currency is undisputed by the SEC, an opinion it has held for years,” he added. “Public expressions of Bitcoin bullishness by the likes of BlackRock’s Larry Fink fortify this advantage.”
As opposed to regulations pertaining to the buying and selling of cryptocurrencies, which are dealt with at the federal level, Harvey pointed out that “State and local rules, as well as cooperation with local governments and utility providers, determine whether projects can be implemented successfully. Federal rules are of little relevance to miners’ operations.”
“Wyoming and Ohio have been very welcoming towards new mining operations, and this goes from the state level – with ardent supporters like Wyoming’s Senator Cynthia Lummis (R.) – to stakeholders in city and county governments,” he said. “And while there have been attempts in the Texas House of Representatives to take a more restrictive stance, the symbiotic relationship between grid provider ERCOT and Bitcoin miners continues to make the state an attractive destination for mining operations.”
Since receiving $35 million in project financing to build tier-zero blockchain data centers in Wyoming and Texas, Sabre56 has completed the construction of two facilities in Wyoming, started construction of their Ohio facility, and secured space in Texas.
“In May, we finalized a multi-site, multi-year deal with GEM Mining, an institutional grade miner which, like Sabre56, is led by executives with a military background, and have since installed 4,510 of the company’s S19 Antminers in one of our new tier-zero blockchain data centers,” he said.
Outlook for Bitcoin mining in H2 2023 and beyond
When asked if he sees the trend of rising Bitcoin difficulty continuing, Harvey predicted mining difficulty will continue to break records as more computing power comes online. “This is nothing new,” he said.
“One of the ingenious mechanisms of Bitcoin is to incentivize efficiency gains in mining – making the blockchain more secure in the process – and ensuring mining infrastructure continues to be aligned with Bitcoin’s growing relevance in the global economy,” he said. “There really is no hard cap on difficulty and hash rate as chip technology and computing power grows more capacious. It is purely a function of the number of miners employed.”
And the number of miners employed will likely continue to increase for the foreseeable future as “Institutional investors moving into Bitcoin mining is the trend of the current market,” he said.
“We have had many conversations with large investors who stood on the sidelines for a while, watching closely how the market went from an amateurish minefield to a promising infrastructure industry,” he noted. “Now, many of these players are negotiating with proven operators and hosting providers to employ capital towards the construction of more efficient, professionally-led, and greener blockchain data centers.”
Harvey emphasized that it’s not only institutional money showing interest in Bitcoin mining, as utility providers and governments, particularly in the MENA region, are also “moving to take their share in this emerging branch of the economy.”
As for the future of Bitcoin mining in the U.S., Harvey said, “Blockchain data centers are the infrastructure behind Bitcoin (and some other digital assets), and as long as the crypto economy continues to grow and evolve, there will be demand for these types of data centers.”
“It is often overlooked how blockchain data centers, while purpose-built for Bitcoin mining computation, are in essence fungible,” he said. “Computing power is already an important commodity, and its relevance will only increase as we enter the commercialization of AI and high-performance computing applications across industries. With these drivers, solid industry growth is a safe bet for years to come.”
Sabre56 looks to support the continued expansion of the industry by offering consulting services to miners and investors, helping them source high-quality mining equipment, providing data center designs from technical drawings to the implementation of advanced heat managing systems, and providing assistance with finding optimal locations to build data centers.
The firm is also focused on developing positive relationships with the communities surrounding mining operations. Through its partnership with “Plan C/Plan Capacity,” Sabre56 will exclusively hire ex-US military veterans to staff their site operations. “We are poised to hire over 150 veterans over the next four months across Texas, Wyoming, Ohio, and other states – enabling them to thrive in their lives after service,” Harvey said.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.