Chinese Bitcoin miners, ousted from their homeland, are now setting their sights on Africa, notably Ethiopia. This migration is driven by the lure of cheap electricity.
The Grand Ethiopian Renaissance Dam, Africa’s largest, stands at the heart of this new trend.
Will Ethiopia Become a Haven for Bitcoin Miners?
Ethiopia’s low electricity costs, some of the lowest globally, coupled with a government increasingly open to Bitcoin mining, have made it an attractive destination for these Chinese companies.
Ethan Vera, Chief Operations Officer at Luxor Technology, commented on the situation:
“Ethiopia offers a unique combination of affordable power and a government that is welcoming Bitcoin mining”
This move, however, is not without its risks. According to data from 2016, around 56% of Ethiopia had no access to electricity.
Things are slowly getting better, however. But even now, in 2024, nearly half of Ethiopia’s population still lives without electricity. This has created a delicate balance between embracing this lucrative sector and addressing domestic energy needs.
This trend in Ethiopia is reminiscent of what transpired in Kazakhstan following China’s 2021 ban on Bitcoin mining.
The Rise and Fall of Kazakhstan Bitcoin Mining
After China banned Bitcoin mining in May 2021, Kazakhstan initially saw a surge in miners migrating to the country. This was mostly due to its close proximity, abundant energy resources, and favorable regulatory environment.
However, the industry’s rapid growth led to power shortages and regulatory challenges, causing a significant decline.
At the time, Hashlabs co-founder Alen Makhmetov explained:
“The situation in Kazakhstan serves as a cautionary example of the delicate balance required in hosting large-scale Bitcoin mining operations.”
Read more: How To Mine Cryptocurrency: A Step-by-Step Guide
As Chinese miners navigate the complexities of establishing operations in Ethiopia, they find themselves in a geopolitically advantageous position. China, as Ethiopia’s largest source of foreign investment, has lent substantial support for various projects in the country. This relationship and Ethiopia’s need for foreign currency inflows set the stage for a potentially symbiotic relationship.
However, the global Bitcoin mining sector continues to evolve under the influence of various factors, including geopolitical dynamics, environmental concerns, and the quest for sustainable energy sources.
As Chinese miners embark on this new venture in Ethiopia, the lessons from Kazakhstan’s experience loom large, highlighting the need for a careful approach that balances industry growth with broader economic and environmental considerations.