Ethiopia is seeking to position itself as the next hub for large-scale Bitcoin mining firms.
In a Feb. 7 report from Bloomberg, Ethiopian Electric Power, the country’s nationalized power monopoly, has inked deals with 21 Bitcoin mining companies, 19 of which are from China.
Bloomberg said that Chinese mining firms began converging on Africa’s Grand Ethiopian Renaissance Dam, the largest dam in Africa, from roughly Q2 2023. The move followed Ethiopia’s regulators giving the green light to Bitcoin miners in 2022, despite the country continuing to prohibit digital asset trading.
Notably, the $4.8B dam was built with support from several Chinese construction firms in yet another sign of the growing economic integration between Sino companies and African nations — with China providing the largest source of foreign direct investment to Ethiopia. The dam’s construction was completed in July 2020.
“Ethiopia will become one of the most popular destinations for Chinese miners,” said Nuo Xu, founder of China Digital Mining Association.
Ethiopia offers among the world’s lowest cheapest power, enticing many of the Bitcoin mining firms cast out when the Chinese Communist Party banned crypto mining in 2021.
Many mining firms struggled to establish a stable base for their operations since exiting China. Other emerging economies like Iran and Kazakhstan initially sought to embrace China’s displaced mining industry, but quickly faced public opposition as citizens found themselves competing with thirsty mining firms for power supply.
“Firstly, countries can run out of available electricity, leaving no room for miners to expand,” said Jaran Mellerud, chief executive of Hashlabs Mining. “Secondly, miners can suddenly be deemed unwelcome by the government and be forced to pack up and leave.”
With half of Ethiopia’s population living without electricity, mining could again emerge as a contentious issue within the East African nation, despite the recently completed dam.
Miners may also be seeking cheaper sources of electricity in preparation for April’s highly anticipated Bitcoin halving event, which will halve the rate of BTC rewards issued to miners as newly minted supply for the next four years.
Last year, CoinShares published a report predicting the halving will precipitate an exodus from “inefficient” miners unable to cover their operating costs moving forward. CoinShares estimated that a single Bitcoin will cost $37,856 on average to produce after the halving.