The Bitcoin mining business is established mainly in those countries where energy is cheaper, that is the case of Argentina. Parallel to the growing popularity of cryptocurrencies in that country, now those who dedicate themselves to mining find fertile ground for their activities.
According to a work published on the Bloomberg portal, the “inefficiency” of state intervention in the economy is capitalized on by the miners. They make this claim due to the ruling party’s policies of keeping electricity prices low to maintain political support among its voters.
In that sense, the economic sector that is getting the most out of this is digital miners. Added to the low energy rates are the climatic conditions that make Argentina an ideal place for ASICs. Mining equipment works at a high speed, producing high temperatures. Thus, cold weather is one of the miners’ best allies when it comes to keeping equipment working in good condition.
Does this guarantee stability for Bitcoin mining in Argentina?
Despite the fact that this situation offers huge profits for those who are dedicated to mining Bitcoin in Argentina, it is not possible to speak of stability. One of the reasons for this is the political polarization that exists between the two most voted parties in the country.
To have a clearer context, the radical left and the radical right alternate power very intermittently. Consequently, depending on which of the two formations governs, the policies change diametrically. In simple words, the coming to power of the right-wing party could lead to an increase in electricity rates.
For this reason, one cannot speak of a guarantee of establishing long-term Bitcoin mining farms in Argentina. However, there are exceptions to the rule, such as Bitfarms’ recent agreement with a local power company to install a “super farm” in Patagonia.
This agreement would allow the Canadian firm to install some 55,000 ASIC machines with a consumption of 210 MW. Likewise, it was known that the alliance between the companies would have a legal duration of 8 years.
The growing popularization of Bitcoin trading and mining in Argentina is based on the protectionist policies of the ruling coalition.
Bitcoin’s last two crashes do not significantly affect earnings
The low electricity tariff in Argentina has been so favorable for Bitcoin mining that the price corrections have not had a significant impact. The last two crashes in the price of the most popular cryptocurrency from $ 60,000 to $ 35,000, have not resulted in losses for miners.
Making mention of this, Nicolas Bourbon, quoted in Bloomberg assures that the price of electricity is far from representing a threat to the business. “Even after Bitcoin price corrections, the cost of electricity for anyone mining from home represents only a fraction of the profits generated,” he noted.
The price of residential electricity in Argentina is, according to the aforementioned publication, twice lower than in other Latin American countries. In nations like Brazil or Colombia, it is more difficult than in Argentina to establish a Bitcoin mining farm. Temperature and electrical costs are the salient factors.
The only exception to the rule could be Venezuela, where electricity costs almost zero. However, the instability of the Caribbean country is much greater than in any other area and attacks by police officials against miners are constant.
Shelter from inflation
The popularity of Bitcoin mining in Argentina is no accident. Access to cryptocurrency has become a lifeline for many people suffering from the consequences of the economic crisis. It should be taken into consideration that there are exchange limitations towards the US dollar. At the same time, the local currency is inflated rapidly.
For investors and salaried people alike, finding a haven of value is of crucial importance. In that scenario, the popularity of cryptocurrencies like Bitcoin becomes apparent. Along with cyclical crises, hyperinflation and the tight control of the government that makes access to foreign currency difficult, the Covid-19 pandemic has been the summit.
Buying bitcoins with pesos is not easy, so many people have started to install equipment in their homes. The cryptocurrencies generated are sold on the exchanges at the price of the parallel market, while the electricity rate is paid at a regulated price. In such a way, the gains are not negligible.
This could be the prelude to a stage of regulation of Bitcoin mining, which would prohibit activity in residential areas. To date, there is no certainty of laws that address the activity.
Data to take into consideration
The government of Argentina is led by a leftist coalition that indirectly benefits Bitcoin mining. The ruling party seeks to maintain its base of political support, thus maintaining the subsidy for residential electricity. Argentine citizens can only legally change $ 200. monthly. With 2% or 3% of monthly income, you can pay the electricity bill in the southern cone country. The annual inflation rate in Argentina is close to 50%. The value of the Argentine peso in the parallel market is 70% lower than the official rate.