This situation leads Bitcoin miners to make big profits but there is no stability due to political polarization. Many see the cryptocurrency as a hedge against the tight controls on the US dollar and the devaluation of the Argentine peso.
Bitcoin mining is a business that consolidates in countries like Argentina, where energy is cheaper. Along with the growing popularity of cryptocurrencies, miners now find fertile ground for their activities.
Miners capitalize on the “inefficiency” of state intervention in the economy, according to Bloomberg. Thanks to the ruling party’s policies, electricity prices remain low to retain voter support.
Crypto-asset miners are the economic sector that is making the most of this situation. In addition to low energy rates, weather conditions make Argentina an ideal place for ASICs. Mining devices produce high temperatures because they work at a high speed. Therefore, cold weather helps miners keep their equipment working in good condition.
Despite Profits, There Is No Stability for Bitcoin Mining
Although this situation allows those who mine Bitcoin in Argentina to make huge profits, that does not mean that there is stability. The political polarization between the two parties with the most votes in the South American country is one reason for this.
Since the radical left and the radical right alternate power very intermittently, policies change diametrically. In other words, electricity rates could rise with the coming to power of the right-wing party.
That situation makes it impossible to speak of a guarantee to establish long-term Bitcoin mining farms in Argentina. However, Bitfarms reached an agreement with a local power company to install a “super farm” in Patagonia.
Bitcoin Crash Does Not Significantly Affect Profits
Despite Bitcoin’s price corrections, the low electricity bills in Argentina have greatly favored Bitcoin mining. The pioneering cryptocurrency’s price crash from USD 60,000 to USD 35,000 has caused no losses to miners.
In this regard, Nicolas Bourbon states that the price of electricity does not represent/pose a threat despite the corrections in Bitcoin’s price. “The cost of electricity for those who mine Bitcoin from home represents only a fraction of the profits generated,” he stressed.
In Argentina, the price of residential electricity is twice lower than in other Latin American countries. For example, it is more difficult to establish a Bitcoin mining farm in Brazil or Colombia than in Argentina. For this activity, temperature and electrical costs are the most important factors.
Venezuela is the only exception to the rule because the cost of electricity there is almost zero. However, the Caribbean country has greater instability than any other area and police officers constantly attack miners.
Bitcoin Mining Is a Hedge against Inflation
Bitcoin mining has become popular in Argentina as many people see it as a hedge against the economic crisis. There are tight controls on the US dollar and the local fiat currency is losing value rapidly.
Investors and salaried people alike consider it vital to find a store of value. In addition to cyclical crises, hyperinflation and tight government controls, the COVID-19 pandemic has been at the top.
Many people have installed equipment in their homes because it is difficult to buy Bitcoin with Argentine pesos (ARS). They sell the cryptocurrencies generated on exchanges at the price in the parallel market while electricity rates have a regulated price. Therefore, the gains are not negligible at all.
By Alexander Salazar
