Hut 8, a Bitcoin mining company, has made the decision to close its mining site in Drumheller, Alberta, Canada. The closure is due to issues with power disruptions and the soaring costs of energy. This move comes after a thorough analysis that revealed the profitability of the Drumheller facility has been significantly impacted by various factors, including elevated energy costs and underlying voltage problems. As a result, the mining facility, which currently produces about 1.4% of Hut 8’s Bitcoin but consumes approximately 11% of its hash rate, will be shut down immediately.
According to Asher Genoot, the CEO of Hut 8, the company’s Bitcoin miners will be relocated to its Medicine Hat facility in Alberta, Canada. However, Hut 8 will retain its lease at the Drumheller site and has the option to re-energize the facility in the future if market conditions improve.
The closure of the Drumheller facility is a result of multiple factors affecting the Bitcoin mining sector. These factors include high energy costs, the record mining difficulty, and the upcoming Bitcoin halving, which will reduce mining rewards by 50%. In addition, electricity prices per kilowatt hour (kWh) in Alberta, Canada have increased by a staggering 1,000% since 2017, according to data compiled by Energyrates.ca. Furthermore, the provincial government has imposed restrictions on new cryptocurrency mining projects due to concerns over their power consumption.
Hut 8 has experienced a decline in revenue, with a year-over-year drop of 57% to CA$55,184 ($40,757) in the first nine months of 2023. This decline was mainly attributed to the falling prices of Bitcoin during that period. In terms of hash rate, Hut 8 currently accounts for 1.3% of the overall processing power of the Bitcoin network.
The company faced further challenges when its stock plummeted by more than 23% on January 19, following allegations from short sellers regarding its partner USBTC’s legal issues in a $725 million merger deal. Hut 8 has strongly refuted these allegations, stating that the report contains inaccuracies, misrepresented data, speculative claims, and unfounded personal attacks. Additionally, on February 8, the firm’s former CEO, Jaime Leverton, resigned from her position.
In summary, Hut 8’s decision to close its Drumheller mining site is a response to the significant impact of power disruptions and rising energy costs. The company will relocate its Bitcoin miners to its Medicine Hat facility and retain the option to re-energize the Drumheller site in the future. The closure reflects the challenges faced by the Bitcoin mining sector, including high energy costs, mining difficulty, and regulatory restrictions.