The global market meltdown has indirectly benefited Russia’s bitcoin miners, even as the cryptocurrency’s price tumbled along with other assets.
That’s because the Russian national currency has rapidly lost value, dropping from 60 rubles to the dollar to 80 in two weeks. In addition to the coronavirus pandemic weighing on all markets, the ruble has also taken a hit from the price war started by Saudi Arabia, which slashed the price of oil, Russia’s main import, to its lowest level in three years.
With the ruble plunging, the average price in Russia for electricity, one of the biggest costs for miners, also dropped. In Siberia, Russia’s main region for mining, the average price for power available to local mining farms fell from 5 cents per megawatt per hour to 4.
At the same time, the price of bitcoin (BTC), while plunging itself, still is calculated in U.S. dollars, which makes the bear market a bit less painful for mining farms in Russia, several such outfits told CoinDesk.
In other words, with bitcoin trading around $6,200 Monday, if you sold bitcoin for rubles the price would be $6,200 times 80 rubles, not 60 rubles as it would have been two weeks ago. Thus, the hit to revenue is mitigated for miners that run their specialized computers from these farms.
“As the cryptocurrency price is bound to the U.S. dollar, the ruble’s fall is beneficial” for miners, said Alexander Shashkov, the founder of Intelion Mining.
Igor Runets, CEO of the Bitriver mining facility in Bratsk, Russia, said he signed two new contracts with miners last week for a total of 24 megawatts per hour of electricity.
All expenses at the farm are in rubles, Runets says, so “with the ruble falling down, Russia is strengthening its position on the [mining] market.” He’s also planning to leverage forward spread contracts for buying dollars at an agreed price in future, to hedge against the ruble possibly going up later. Bitriver is now in talks with one of the Russian banks about buying such contracts, Runets said.
“Dollar exchange rate does not affect the price of electricity. Salaries and other costs don’t rise that fast either,” said Zakhar Fedorov, the business development manager at Cryptoreactor, another mining farm in Bratsk. However, his farm hasn’t seen an inflow of new clients from abroad yet.
“We do have requests from the foreign miners, but no more than usual. Due to the bitcoin price crash and the hysteria around coronavirus, in such a situation many prefer to sit on cash,” Fedorov added.
Mining in Russia is mostly concentrated in Siberia, where low temperatures most of the year provide natural cooling and the electricity is cheaper than in other parts of the country due to the abundance of hydropower plants.