Potential Impact of US-Canada Trade Dispute on Bitcoin Mining

The ongoing trade tensions between the United States and Canada pose a significant threat to the stability of Bitcoin mining operations, particularly in North America. As the trade war escalates, Ontario Premier Doug Ford has openly suggested that Canada might retaliate against the United States by imposing tariffs on electricity exports to northern US states or even halting the power supply altogether. This potential move comes in response to tariffs introduced by US President Donald Trump, sparking concerns across various industries.

US-Canada Tensions: A Threat to Bitcoin’s Hashrate

In a recent statement, Premier Ford made it clear that Canada is prepared to take drastic measures if necessary. He stated, “If he wants to destroy our families, I’m going after absolutely everything.” This warning highlights the possible impacts on up to 1.5 million customers located in New York, Michigan, and Minnesota. Industry experts are now increasingly concerned about the implications for Bitcoin mining, a sector heavily reliant on stable and affordable electricity.

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Analysis by Industry Experts

Michael Maloney, the Founder and CEO of Incyt, shared his insights on the situation. He highlighted the significant risk facing Bitcoin miners in the US Northeast if Ontario decides to cut or limit its electricity exports. According to Maloney, the region between New York and Canada hosts over 300 megawatts—and possibly up to 500 megawatts—of Bitcoin mining capacity. This accounts for 2.5% to 5% of the global hashrate, making it a critical area for the cryptocurrency mining industry.

In his analysis shared on X, Maloney emphasized the importance of the low-cost energy available in the area, which has been a major factor in attracting large-scale Bitcoin mining operations. However, recent data from the New York Independent System Operator (NYISO) indicates that energy prices, once around $0.037 per kWh, are expected to climb by approximately 30% in “day-ahead” projections. This increase poses a significant challenge to miners who depend on affordable electricity to maintain profitability.

Potential Consequences of Power Disruptions

Should up to 1.5 million electricity users in New York, Michigan, and Minnesota lose access to Canadian power, they will inevitably turn to local power grids. Maloney speculates that with the onset of winter, these users might require as much as 1,000 kW/Hr per month, creating a demand shortfall of around 2,000 MW/Hr. This scenario would necessitate a 12% increase in New York State’s power generation capacity, currently at 17 GW, pushing prices higher.

Maloney predicts that this surge in demand will cause power prices to spike by 40% to 70%, raising costs to $0.075 kW/Hr. Consequently, the overall expenses for electricity could climb to over $0.12 kW/Hr, a substantial increase from current levels. Such a rise would severely impact the 1.5 million affected individuals, potentially increasing their power bills four to five times over the usual rates.

Challenges for Bitcoin Miners

The primary concern is whether Bitcoin mining operations can remain profitable under these elevated energy costs. Maloney referenced data from AsicMinerValue.com, suggesting that only mining devices with efficiencies “better than 16.5 j/TH” might continue to be profitable. He noted that these high-efficiency devices are relatively new and may be on back-order, with deliveries scheduled over the next year. Any tariffs could further inflate their prices by 25%, complicating miners’ efforts to upgrade their equipment.

While miners might find brief respite through demand-response programs, Maloney warns that such solutions are likely unsustainable in the long run due to rising costs and tariffs. Should mining facilities shut down or reduce operations, Bitcoin’s hashrate could experience a short-term decline, slowing down the network temporarily. However, difficulty adjustments would eventually stabilize block times.

Broader Implications for the US Mining Sector

The repercussions of this trade dispute could extend beyond the immediate regions affected, potentially impacting major mining operations in Texas and other states. Higher tariffs might force miners to relocate or rethink their strategies. Maloney anticipates that the stranded hashrate may shift to other jurisdictions, such as Canadian and Chinese mining operators eager to capitalize on the situation and access more affordable electricity.

Conclusion: A Cautionary Tale for Big Business

Maloney’s analysis underscores a crucial lesson: trade wars, with their accompanying tariffs and disruptions, pose significant threats to businesses. The Bitcoin mining industry, which has grown into a substantial enterprise, is no exception. As tensions persist, stakeholders must remain vigilant and adaptable to navigate the changing landscape.