The Bitcoin educator discussed the impact of the drop in oil prices on electricity costs and the competitive advantage it gives US miners
Tech entrepreneur and Bitcoin proponent, Andreas Antonopoulos, addressed the impact of falling oil prices on Bitcoin mining in a recent video on his YouTube channel. Calling it a net positive for Bitcoin miners worldwide, Antonopoulos stated that the recent downturn of oil prices will benefit crypto-miners by providing cheaper electricity. The video titled “Down the Rabbit Hole”, posted on his channel May 27, explained that miners from the United States and China will reap most of the rewards from the drop in oil.
The Coronavirus global pandemic immensely affected oil prices as it had a domino effect on world economies. Most countries across the world were either in lockdown or practised social distancing. This led to reduced travel, the shutting-down of factories and an overall reduction in oil demand. Oil production, however, continued at previously determined levels. This gap between the demand and supply forces led to a never seen before price drops, as futures, including the WTI, traded at a negative. Although the oil market has now recovered, oil prices are still low on a macro scale.
Antonopoulos explained that the competition between buyers was not determined by modern mining rigs anymore. Instead, it was based on “the unit cost of electricity, which is dominated in some places by the cost of oil.” Thus, this global fall in oil prices will benefit miners by providing cheaper electricity worldwide, however, this benefit will not be distributed “equally worldwide.”
The US gets 36% of its energy from petroleum (also known as petrol or gas and is the largest producer of oil in the world. Thus, Antonopoulos believes there may be great opportunities for cheap power, which will be a potentially huge advantage for US-based crypto miners. The situation “would suddenly make U.S.-based miners much, much more competitive and profitable,” Antonopoulos stated in the video.
China’s influence on Bitcoin mining cannot be undermined. According to a report by Coin Telegraph, Chinese miners constitute 66% of the 2019 global hash rate. Antonopoulos said that most Chinese crypto mining is completed with a coal-powered hash. However, falling oil prices would still give a financial advantage to Chinese miners.
“Because energy and electricity is a fungible commodity if you are connected to a coal-fired power plant and somewhere else, a gas-fired or oil-fired power plant has half the cost of energy because its oil is much cheaper, it’s going to cost less to get electricity from your coal plant…, “ He explained.
The downturn of oil prices will lead to the drop in the price of electricity worldwide but it is going to be the crypto miners of the United States, especially in the mining operation in Texas, and China that stand to gain.