Crypto mining in Kazakhstan affected by unrest and shortages, miners to look at U.S. move

Xive Mining Ltd. Co-founder Dibar Bekbauov joins Yahoo Finance Live to discuss how the power shortages and political unrest are affecting bitcoin mining operations in Kazakhstan and the prospects of migrating facilities to the U.S.

Video transcript

AKIKO FUJITA: An internet blackout brought on by political unrest in Kazakhstan led to a big drop-off in the hash rate of Bitcoin mining there last week. The world's second largest Bitcoin miner is largely recovered since, but our next guest says, there's another big issue looming in the country's crypto space, a power crunch without enough energy supply to support all of the mining demand there.

Let's bring in Didar Bekbauov. He is the co-founder of Xive Mining. And Didar, it's great to talk to you today. You're actually in the US scoping out some new locations, but let's start back home because we saw the images last week with the political unrest that's happening. The blackout that followed that, you know, how much of that is recovered? And what are you hearing from miners in your country right now?

DIDAR BEKBAUOV: Yes. Hello, Akiko. Now internet is totally back. We are back to mining in every region. Mostly it happened because of the riots in the South of Kazakhstan, but mining is concentrated in central part and northern part. So we are not much affected apart from this internet blackout.

AKIKO FUJITA: This all, of course, comes when Kazakhstan has seen over the last several months incredible migration coming out of China after Bitcoin mining was banned there. How much of the political unrest, you think, will maybe stall some of that momentum and the growth that you've seen in Kazakhstan? As you said, the unrest didn't necessarily happen in the hub of the miners, but at the same time, there's got to be some risk that a lot of them are now looking at.

DIDAR BEKBAUOV: Yes, but most of the miners that migrated from China already deployed all the spare electricity in the country. So after they moved to Kazakhstan, we don't have no more electricity left. So all these mining facilities consuming a lot of electricity. And they have kind of impacted the local energy sector. But now, yeah, because of this unstable political situation, some of them are thinking about where to expand next, and one of the top priorities for mining is the United States now.

ZACK GUZMAN: Yeah, I think that's pretty surprising, too, Didar. I mean, when we talk about, maybe, some of the stability, it was shocking to see kind of how quickly some of the hash rate flew out of China as they kind of clamped down. And you think about some of the things going on in Kazakhstan, I think some of the costs may have been overlooked by a lot of miners, in terms of having to move around.

Maybe not a surprise to see them coming over here to the US, where stability, at least on those fronts, seems to be one of our best strengths. I mean, when you're kind of looking around the best place to land here, now, I know a lot of miners are down in Texas, people looking for kind of the fringe prices. Where do you see the best opportunities when you look across the US now?

DIDAR BEKBAUOV: We are looking always at costs. So where we can find cheap electricity, there we can build a mining farm. So obviously, like Texas, one of the best locations in the United States. Also we have looked some facilities in New York State and in Nebraska and Kentucky. So those are four top mining states for the mining in the United States.

ZACK GUZMAN: Are you just looking at cost, though? I mean, we hear a lot about renewable energy, and you know, the debate around if you have more miners, it's going to push up energy costs for everybody. I mean, when you were in Kazakhstan, did you see a lot of that happening? Did you see, kind of, prices rising where you guys landed? Because, you know, the theory is that it really-- it doesn't do that.

DIDAR BEKBAUOV: Usually, yeah. We try to find renewables or green energy, but in this market, when you consume a huge amount of electricity, you have to also look at costs. So we all compete for the mining of Bitcoin, right, with other miners. So whoever has the best cost structure, then he kind of in a favorable position. Why a lot of mining happening in Kazakhstan? Again, because of the very low electricity prices. And in Kazakhstan, we don't have much of renewables. Mostly the source of electricity is either gas or coal, but here you have more of that. You have wind power, solar power, and other renewables.

AKIKO FUJITA: And so talk to me about your expansion plans. Obviously, you've been helping a lot of the miners relocate from China to Kazakhstan. But you, yourself, are looking at expanding into the US. How big is that footprint you're looking at? And to follow up on Zack's point, where is the opportunity that you find especially interesting right now?

DIDAR BEKBAUOV: Yes, in Kazakhstan, we face that we cannot expand our business anymore because of these electricity limitations, and that's why I came here. I am doing my research and looking for mining-- possible mining locations, and I think Nebraska is a good place to start. And we are looking to start, like, from, like, not big farm, maybe 10 megawatt farm, just to enter the market and see how it goes. If it will be successful in terms of revenue, then we can expand. And also I'm looking at some locations in Texas, but here in Texas, we haven't figured it out still how to interact with the local energy companies because you have, like, different costs and different price structure in different states. So I think Texas has an independent grid, so we need to do some more research here.

ZACK GUZMAN: Real quick, last question. I mean, obviously I'm sure you don't talk to every miner in Kazakhstan, but just, kind of, if you were to ballpark how many are considering coming over here now-- I mean, the hash rate is-- I didn't know Kazakhstan was the second largest in terms of hash rate. How much do you think, ballpark number, would be coming over to the US, as you estimate it?

DIDAR BEKBAUOV: I believe that US will be the biggest mining hub in the World, so approximately, maybe, more than 60% of total hash rate will be in the United States within two years.

ZACK GUZMAN: All right. Wow. All right. We'll be watching. Didar Bekbauov, appreciate you coming on here to chat with us today. Xive Mining Limited co-founder. Thanks again, and good luck on the search out there. Enjoy the Cornhusker State.