Due to the heavy rains, often coming against the backdrop of mild autumn and winter 2020 in the Scandinavian region, the power of hydroelectric power has inevitably increased. In addition, the decrease in the cost of mining coincided with the increase in the price of Bitcoin.
As a result, Scandinavia has again become a profitable region for cryptocurrency mining thanks to a significant reduction in electricity prices.
Record wet weather in 20 years has led to an increase in hydroelectric power generation, leaving electricity prices in Sweden and Norway among the lowest in the world. The resulting market glut of "main raw materials" for the creation of the cryptocurrency was in the year when the price of Bitcoin has almost quadrupled.
Currently, cryptocurrency mining is carried out on giant computer farms the size of an airport hangar. And since electricity is one of the main resources of mining, the energy consumption of modern mining farms is comparable to its consumption by a city of 70,000 households. Thus, the current market dynamics have created an alternative for large miners to traditional Bitcoin manufacturing points such as China, Kazakhstan, and Canada.
Tokens and regulations
It may be surprising but, quite a significant portion of crypto miners in Norway actually dedicate their mining rigs to local tokens as opposed to large coins like BTC.
These tokens often belong to crypto casinos trying to get into the Nordic market but can’t due to regulation.
According to www.Gratis-spinn.com, a beneficial token is the only way they could convince locals to bypass regulations and play with them.
High energy costs and low prices
Over the past few years, profits have remained relatively low due to higher energy costs and lower prices for most virtual currencies. Because of this, many miners, whom the region attracted during the last rate surge in 2017, left it.
Philip Salter, who is the production director at Hong Kong-based Genesis Mining Ltd., which operates a data center in the Swedish city of Boden noted that those who have experienced the difficult period of recent years have now been rewarded for their efforts.
He also added that there were times when they were without profit at all, but over the last year the profitability has more than tripled.
Returning to the current boom, it should be noted that due to unusually wet weather combined with moderate temperatures, the water level in the reservoirs of the Scandinavian countries has risen to the highest level in more than 20 years, "flooding" the region with generating capacity. As a result, electricity tariffs were close to zero for a long time. Thus, in 2020 the average price was about a third of the price in Germany, which is the largest electricity market in Europe.
In 2019, electricity prices for industrial consumers in Norway were the lowest among the 30 member countries of the International Energy Agency. In the first half of this year, there are also the lowest electricity tariffs for non-premium consumers in the European Union, slightly higher than in Iceland, which is another center of cryptocurrency production.
Tor Reier Lilleholt, head of the analytical department of the Norwegian consulting firm Wattsight AS noted that the tariffs are among the lowest in the world, except for fees and taxes. This summer the low price has persisted for so long.
Advantages of mining in the Nordics
The main environmental advantage of mining in the Northern region is that the production of electricity there is virtually no carbon monoxide, mainly hydro, nuclear, and wind energy. This is becoming increasingly important for many institutional investors who are attracted to cryptocurrencies and is one of the main factors of the latest price jump. The influx of Bitcoin from the Northern region helps to reduce the profile of the political risks of the cryptocurrency.
Salter notes that there is a very important strategic shift from mining in China to mining in Western countries such as Sweden, as Bitcoin investors become more open and want greater stability and maximum security. This is one of the most significant achievements in Bitcoin mining that is worth paying attention to.
Comparing electricity prices around the world is difficult because they vary from industry to region due to taxes, fees, and subsidies. One such attempt was made by the World Bank, which estimates the number of accounts of an imaginary warehouse in the capital of each country. According to this indicator, Sweden and Norway took positions well below China, but above other cryptocurrency production centers such as Kazakhstan and Mongolia.
The cost of electricity can become even more important for miners. The hashing speed, the number of calculations needed to produce each bitcoin, is steadily increasing. And in May, miners' remuneration was cut as a result of halving - reducing the number of tokens they receive to keep the deficit.
Many miners who left the region after the boom and bust of 2017-2018 can return there. The announcement in November of the investment of US$35 million by the Dutch blockchain company Bitfury Holding BV in the expansion of its Norwegian platform may mark the beginning of a new trend.
According to Tyler Page, Bitfury's business development manager, recently they have seen a marked increase in investor interest in Bitcoin mining opportunities in Norway. This was made possible when energy prices were particularly low this year with the rise in Bitcoin prices.
