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Which US State is Best for Bitcoin Mining in 2023?

Rising electricity prices in the United States have increased the costs of bitcoin mining. As demand for electricity grows and expenses increase, bitcoin miners face higher operating costs, which reduces their profit margins.

Electricity is a critical factor in bitcoin mining, which is the process of verifying transactions and adding them to the blockchain. As the Bitcoin network grows, so does the demand for electricity to power the mining process. Rising electricity prices in the United States have contributed to increasing the costs of bitcoin mining, making it less profitable for miners.

energy use around the world

One of the major expenses for bitcoin miners is the cost of electricity, as the mining process requires a huge amount of energy. The Bitcoin Energy Consumption Index estimates that the Bitcoin network consumes more energy than the entire country of the Philippines. Electricity consumption is primarily driven by the need to power the specialized computer equipment used in the mining process, which requires enormous energy.

Energy consumption by country. source: digital world

The cost of electricity varies significantly across different states in the United States, with some having much higher electricity rates than others. For example, in Hawaii, the average residential electrification an average About 30 cents per kilowatt-hour, more than double the national average of 13 cents per kilowatt-hour. In contrast, states like Washington and Louisiana have some of the lowest rates in the country, with average rates of about 8 cents per kilowatt-hour.

Higher electricity rates in some states have made the work of bitcoin miners less profitable. This is because rising electricity costs raise the overall cost of mining and eat away at miners’ profits. As a result, some miners have had to shut down operations or move to areas with lower electricity rates to stay profitable.

Another factor contributing to higher electricity prices is the increased demand for electricity. As the population grows and the use of electricity increases, the need increases, causing the cost to rise. This increased demand has been particularly evident in places like California, where populations have swelled, straining the state’s power grid and causing blackouts.

Questioning the approach to sustainability

Rising electricity prices have also led to concerns about the environmental impact of bitcoin mining. As the energy consumption of the Bitcoin network grows, so does the carbon footprint of the mining process. This has led to criticism of bitcoin mining as an environmentally unsustainable practice, with some calling for more sustainable mining practices or a shift to less energy-intensive alternative digital currencies.

To address these concerns, some bitcoin miners have been exploring alternative energy sources, such as solar and wind power. By using renewables, miners can reduce their carbon footprint and possibly lower overall electricity costs in areas where renewables are cheaper than conventional sources. However, the use of renewable sources for bitcoin mining is still rare, and most miners rely on traditional energy sources such as coal and natural gas.

In addition to rising electricity prices, other factors are driving the rising costs of bitcoin mining. These include the cost of specialized computer equipment, the difficulty of the mining process, and the price of bitcoin itself. As prices fluctuate, mining profitability also fluctuates, and miners must constantly adapt to changing market conditions to stay profitable.

Where things stand

In 2023, the electricity rate continues to reach new highs, which is not surprising. Bitcoin miners require at least $17,000 to produce a single bitcoin in the US versus $5,000 to $10,000 a year ago. This is according to the Hashrate index of Bitcoin and Luxor mining data source.

From January 2022 to January 2023, commercial electricity tariff It increased by an average of 10.71% per US state. This is higher than the average CPI rise of 6.40%.

Average Industrial Average in January 2023 vs. January 2022 Source: EIA / Hashrate Index / Luxor
Average Industrial Average in January 2023 vs. January 2022. Source: EIA / Hashrate / Luxor Index

In addition, the relatively poor performance of major digital assets in the past year has caused huge losses for miners. This is mainly due to the increase in operating costs and lower returns.

Although, the first quarter of 2023 saw a change in scenario. Bitcoin hash rate is heading higher from its lows in 2022. According to data From CoinWarz, the latest BTC hash is 382.16 EH/s. This year, it set a new high of 296.8 EH/s on May 1st. Mining companies also posted a rally in their stocks as the market tried to recover.

It better be the worst country for bitcoin mining

When all of the above ideas are put together, different geographic regions of the United States have different results.

New Mexico has relatively cheap electricity, which makes it one of the most affordable states for bitcoin mining. According to the Hashrate Index report, New Mexico emerged as the most reasonable and profitable state for bitcoin miners in the first quarter with a price of $16,850 for a single bitcoin coin.

Energy cost to produce 1 bitcoin across US states.  Source: Hashrate Index / Luxor
Energy cost to produce 1 bitcoin across US states. source: Hashrate/Luxor Index

On the other hand, Hawaii has some of the highest electricity rates in the United States due to its secluded location and dependence on imported oil for power generation. Thus, Hawaii was the most expensive at around $114,590.

Some states have taken steps to shield miners from the blame around energy use that has faced critics over the years. However, mining operations have taken a greener path to offset the carbon footprint. In fact, the World Economic Forum (WEF) has hailed bitcoin mining as one way to reduce emissions.

Increased profitability

In general, miners have experienced ups and downs during their bitcoin mining journey. Energy deflation, or a decrease in the cost of energy, can boost miners’ profitability in the short term by reducing one of the most important costs of bitcoin mining: electricity. If energy prices fall, miners can use the same amount of energy to mine more bitcoins, which increases their profit margins.

However, it is important to note that the energy downturn may also lead to increased competition in the mining industry. Lower energy costs make it affordable for more people to mine bitcoin. This could increase the hash rate, making competition more difficult and costly for individual miners.

Furthermore, energy prices can be volatile and subject to geopolitical and market-related factors. While the energy downturn may benefit miners in the short term, it is necessary to consider the long-term sustainability and viability of bitcoin mining operations in the face of potential fluctuations in the cost of energy.

Disclaimer

Following the Trust Project’s guidelines, this featured article features opinions and perspectives from industry or individual experts. BeInCrypto is dedicated to transparent reporting, but the opinions expressed in this article do not necessarily reflect those of BeInCrypto or its employees. Readers should verify information independently and consult with a professional before making decisions based on this content.

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