MGT Capital, a major Bitcoin mining company, is revising its plans for expansion. Last year, the company decided to expand to Sweden, which offered the prospect of low-cost electricity and inexpensive cooling. The company expected that this would provide an improvement over its original Washington location.
Now, that expansion plan has fallen through. The company has begun shipping out its mining rigs and has cancelled its contracts with Swedish businesses. MGT Capital will instead create a new mining facility in North America.
Mining Costs On the Rise
Bitcoin mining has become increasingly hard to profit from, as the difficulty of finding a new block continually rises. MGT Capital notes that the Bitcoin network recently grown by a factor of six, which has driven up mining difficulty to the same degree. Additionally, the demand for ASIC miners has increased the price of Bitcoin mining hardware.
According to MGT Capital, Bitcoin mining required just twelve Bitmain S9 miners last year, whereas it now requires about 80 of those mining rigs. (Proportionally speaking, that is — the company currently owns about 6800 mining rigs).
Although high mining costs did burden the company, other costs account for the Swedish facility’s failure: an inexperienced hosting vendor and engineering errors. It seems that the costs of maintenance and management nearly outweighed the benefits of Bitcoin mining:
“While the facility was able to produce Bitcoin, running a total of 50 Ph/s for all miners, the costs of rectifying vendor errors has required large outlays of capital with uncertain returns.”
Suggested Reading : Learn more about mining difficulty here.
Location, Location, Location
MGT Capital will continue to operate its original facility in Central Washington. The company is also seeking another location in the U.S. or Canada, where it believes that operating costs will be “materially lower and more stable than in Sweden”.
Washington has become a hotspot for crypto mining due to low electricity rates. Meanwhile, a Canadian company has been building an electrical substation specifically devoted to crypto mining.
The current mining hotspots will probably remain viable facility locations for some time. But with so many complicating factors, a new mining safe haven may one day rise to prominence.