Only A Year Away From Disaster: Beijing’s Bitmain and Allrise Capital’s Usk Bitcoin mine faces financial collapse next spring unless bitcoin prices explode

It’s called “the halving” and it’s happened roughly every four years since the first Bitcoin token was created in 2009.  But the next one, currently expected in March or April next year, will devastate the bitcoin mining industry unless the price of Bitcoin doubles over the next year.
 
The halving is important to the residents of Pend Oreille County because it substantially increases the risks to our citizen-owned PUD and its ratepayers in providing Bitmain/Allrise more than three times more electricity than the rest of our county together uses—especially as our PUD is currently engaged in negotiations for a new electricity service agreement for bitcoin mining to take effect this October and Bitmain/Allrise is aggressively working to coerce our PUD into subsidizing their power.
 
Bitcoin mining is essentially a guessing game conducted by hundreds of thousands of highly specialized computers around the world making up to 440 quintillion guesses each second in a competition to be the first to randomly guess a complex 64-digit code. The miner that wins that competition currently receives a reward of 6.25 bitcoin and the right to charge fees on the next block of bitcoin transactions. Approximately 98% of miners’ income comes from selling the bitcoin they receive for winning. Each competition takes approximately 10 minutes.
 
When a halving event happens, the number of bitcoin awarded to miners from winning each competition is cut in half—hence “the halving.” Next March or April (the date is based on how quickly bitcoin is created) the reward will drop from 6.25 bitcoin to 3.125 bitcoin.

The creators of bitcoin cleverly designed "the halving" as a method to inflate the value of bitcoin tokens over time by regularly increasing the cost of producing bitcoin. This is why many describe bitcoin as a ponzi scheme that relies on later buyers paying higher and higher amounts to the profit of a small number of creators and initial investors. When bitcoin was first created in 2009, the reward was 50 bitcoin, then 25, then 12.5, now 6.25. Next year, 3.125.  At some point, the cost of producing bitcoin would become unsustainable. For many miners, that time will be next March or April. 
 
Because most of their income depends on the sale of the bitcoin they win, the halving will also halve their revenue. An alternative way to frame it is that the halving will double their costs. The following chart shows the current and future approximate average cost of electricity for each bitcoin for Beijing’s Bitmain and Allrise Capital win at their Usk facility based on electricity usage data from their website MerkleStandard.com.  Please note that this chart on shows only the cost of electricity and does not include the costs for the computers themselves, the facility, employees, or other operating costs.
 
The green line shows the current electricity cost per bitcoin depending on the power price. The red line shows the cost
The black vertical line shows the adjusted average market cost of electricity on the Mid-Columbia Hub market since last September (adjusted downward by excluding spikes above $200 per megawatt hour. 

The chart shows that even at today’s relatively elevated bitcoin price of $28,500 (at the time of this writing), after next March/April, the cost of electricity alone will exceed the value the of the bitcoin that the Usk facility can win.
 
One of two things will need to happen for bitcoin mining as an industry to be viable after the halving (or a combination of both). Either the price of bitcoin will need to increase substantially (roughly double) or one half to two-thirds of current miners will need to go out business (a reduction in the number of miners competing for bitcoin increases the number of competitions each individual miner can potentially win).
 
Bitcoin industry news sites predict the halving will trigger a “survival of the fittest” natural selection process where only the companies with the most efficient miners and lowest electricity prices will survive. As we previously reported, the Bitmain/Allrise Usk is not among the fittest due to their higher-than-average power prices and mediocre efficiency of most of the mining computers. See our previous report: POC Cryptonomics - PROTECT PEND OREILLE
 
Next year’s halving creates significant risk for the residents of Pend Oreille County. Bitmain/Allrise through their joint venture LLC Cascade Digital Mining, are currently renegotiating their electricity service agreement with our citizen-owned PUD. It is critical that our PUD staff includes the existential risk posed to the viability of the Usk bitcoin mining facility by the halving in its considering how to insulate itself and its customers from the pending failure of bitcoin mining in our county.  See our previous report on what is at stake: ​What's at stake? Crypto plans in power negotiations would cost Citizens of POC millions, throttle local economy - PROTECT PEND OREILLE