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Note To Elon: Crypto Miners Part Of Solution To Curbing Greenhouse Gas Emissions

By Frank HolmesCryptocurrencyMay 13, 2021 01:35PM ET
www.investing.com/analysis/note-to-elon-crypto-miners-part-of-solution-to-curbing-greenhouse-gas-emissions-200579913
Note To Elon: Crypto Miners Part Of Solution To Curbing Greenhouse Gas Emissions
By Frank Holmes   |  May 13, 2021 01:35PM ET
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And just like that, Elon Musk has turned on Bitcoin.

In a tweet on Wednesday, the self-proclaimed “Technoking of Tesla (NASDAQ:TSLA)” said his company—which announced in February that it bought $1.5 billion in Bitcoin—would be suspending vehicle purchases using the cryptocurrency. Musk cited crypto miners’ “increasing” use of fossil fuels, particularly coal, “which has the worst emissions of any fuel.”

The price of Bitcoin responded by dipping below $50,000, ending the day down more than 12%, its worst trading session since January.

Musk’s tweet comes a week after a new bill in New York was introduced that proposes to halt operations at all cryptocurrency mining facilities in the state for up to three years while an environmental impact study is conducted.

According to the legislation, individual crypto mining centers would be permitted to return to normal operations only if they’re found not to interfere with the state’s decarbonization goals.

I don’t question Musk’s or the New York legislature’s good intentions, but I respectfully disagree with the underlying insinuation that crypto miners in particular are a threat to the climate.

Don’t get me wrong: The computer processing power needed to mine Bitcoin, Ether and other digital tokens is not insignificant. The University of Cambridge’s Bitcoin Electricity Consumption Index (CBEI) estimates that the global Bitcoin network, running at full capacity, uses about 147.8 terawatt hours (TWh) on an annualized basis, or almost as much as Sweden consumes every year.

That’s a big number, but it doesn’t take into account the percentage of Bitcoin mining that uses renewable energy. In a December 2019 report, CoinShares believed it to be 73%. Last month, ARK Invest’s Yassine Elmandjra said it was closer to 76%.

If those figures are accurate, then there really shouldn’t be any concern about crypto mining as it relates to greenhouses gas emissions. I believe New York law-makers will find that to be the case, should the bill become law.

Square: Crypto Key To Clean Energy Future

In fact, I expect the industry to convert entirely to renewable energy much more rapidly than other industries precisely because it uses so much energy. Solar and onshore wind are now cheaper than coal and even gas, so it only makes sense from a cost perspective.

Take HIVE Blockchain Technologies (OTC:HVBTF). We use nothing but cheap renewable energy in Sweden, Iceland and elsewhere to mine Bitcoin and Ethereum. This is one of the reasons why HIVE is among the most profitable crypto miners right now.

Crypto mining may even help accelerate the deployment of renewable energy, which should please Musk. That’s according to a special report published last month by Square and ARK Invest. The digital payments company says that, because crypto miners are “unique” energy buyers, they’re an ideal complement to wind and solar as well as better storage technology. Returns on investment could be improved, for one thing, which would incentivize the deployment of new renewable and storage projects.

The chart below illustrates the impact that Bitcoin mining could have on solar in particular. The size of the blue bubbles is proportionate to the size of the Bitcoin network in the U.S. As the size of the network increases, the greater amount of solar power (y-axis) and battery storage (x-axis) is available to the energy grid. “Increasing Bitcoin mining capacity could allow the energy provider to ‘overbuild’ solar without wasting energy,” the report says.


I believe this model could be a win-win for not just crypto miners, which would get access to cheap energy, but also states such as New York that have aggressive decarbonization goals. Everyone’s needs would be met.

Mike Colyer, CEO of New York-based crypto services firm Foundry, agrees. Locating renewable energy projects near crypto mining operations “allows for a faster payback on those solar projects or wind projects,” he told Markets Insider in March. More renewables “can be built faster in regions where before it was not attractive because they would produce too much energy for the grid in that area.”

Total Crypto Ecosystem At $2 Trillion Market Cap, Ether At $500 Billion

Despite Musk’s flip-flop, demand for cryptos continues to boom, with trading on major crypto exchanges reaching an incredible $1.7 trillion in April. Early that month, the size of all cryptocurrencies surpassed $2 trillion for the first time, more than double where it was at the beginning of the year.

Early Wednesday, the market cap for Ether, the Number 2 digital coin, briefly surpassed $500 billion as its price touched a new all-time high of over $4,300 before declining on Musk’s tweet. To put that in perspective, $500 billion is greater than the market cap for JPMorgan (NYSE:JPM) and Visa (NYSE:V).

Ether Demand Is Reflective of Growing Awareness of DeFi’s Potential

Ether, of course, powers the Ethereum network, which is the basis for decentralized finance (DeFi). With Ethereum, anyone with an internet connection can have access to financial services—from banking to investing to borrowing and lending—that in the past have been opaque, tightly-controlled and inequitable. When there are no overhead costs associated with running a traditional bank or insurance firm, prices can come way, way down. And since everything is built on smart contracts, human error can be eliminated.

The growing demand for Ether tells me investors are becoming more and more aware of DeFi’s potential in making financial services cheaper, faster, more reliable and more equitable. It’s also a big reason why we made the decision to mine Ether at HIVE on top of Bitcoin. Bitcoin is clearly digital gold, which I believe will remain hugely in demand, but Ether is the fuel that powers the whole system.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content. Beta is a measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole.

The Cambridge Bitcoin Electricity Consumption Index (CBECI) provides a real-time estimate of the total electricity load and consumption of the Bitcoin network. The model is based on a bottom-up approach initially developed by Marc Bevand in 2017 that takes different types of available mining hardware as the starting point. Mr. Holmes serves on the board as non-executive chairman of HIVE and held shares and options at March 31, 2021. Effective August 31, 2018, Mr. Holmes was named Interim Executive Chairman of HIVE while a search for a new CEO is undertaken.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (3/31/2020): Tesla Inc.

Note To Elon: Crypto Miners Part Of Solution To Curbing Greenhouse Gas Emissions
 

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Note To Elon: Crypto Miners Part Of Solution To Curbing Greenhouse Gas Emissions

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Comments (11)
Jan Skilbrei
Jan Skilbrei May 14, 2021 7:39AM ET
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You missed the obvious: there is too little 'green' energy in the world, hence; Bitcoin mining  leaves less 'green' for necessary (transportation of , eg food). Other blockchain techs are less energy consuming, deserving the support.
Karl Kessler
Karl Kessler May 14, 2021 7:39AM ET
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Very clearly put.
Mats Skon
Mats Skon May 14, 2021 1:34AM ET
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What purpose do cryptos serve??
Karl Kessler
Karl Kessler May 14, 2021 1:34AM ET
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As far as I can tell, they were created to be a means of transacting without using the banking system, and restrictions they may impose, e.g. getting around international restrictions, record keeping, law enforcement in general. Recently they've become chips in an massive unregulated casino.
Jo Pa
Jo Pa May 14, 2021 12:41AM ET
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90% of crypto doesn't even use mining anymore, it's old tech. CO2 is produced to make panels and batteries, and batteries are toxic when disposed. Lastly, the Earth was hotter during the Roman Empire.
Benjamin McIntire
Benjamin McIntire May 13, 2021 11:59PM ET
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75% Renewable? Lol...
Karl Kessler
Karl Kessler May 13, 2021 7:44PM ET
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What would be a better use for solar panel energy? A) Churning out lucky numbers B) Building more solar panels? Which would do more to increase adoption of renewable energy? I really don't think we need to be debating this.
tom joe
tom joe May 13, 2021 7:44PM ET
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Cause building solar panels doesn't pollute.  Try Nuclear it can't be beat.
Karl Kessler
Karl Kessler May 13, 2021 7:44PM ET
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tom joe I'm a fan. We're going to need every energy source we can get soon enough.
Karl Kessler
Karl Kessler May 13, 2021 7:31PM ET
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Crypto is a waste of energy. Wasting renewable energy is the same as wasting fossil fuels, because it takes renewable sources away from the productive uses they were built for. Elon Musk is probably the most powerful voice in energy and engineering today, and I'm glad he's bringing up the issue.
tom joe
tom joe May 13, 2021 7:31PM ET
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Better Kerry invests in oil and the rich fly around in their planes.
Thomas Vonach
Thomas Vonach May 13, 2021 6:43PM ET
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Musk has lost his mind. He is a market manipulator. Hope the SEC grills him.
Gene Kret
Gene Kret May 13, 2021 6:43PM ET
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I hope you lose your mind Von and you need someone to wipe your rear.
Alan Rice
Alan Rice May 13, 2021 6:22PM ET
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Elon is correct in canning crypto. What the World DOESNT NEED is A) MORE MACHINES and B) More Tech "solutions" to human squandering of Earths LIMITED NATURAL RESOURCES. Tic- Toc. .
Karl Kessler
Karl Kessler May 13, 2021 6:22PM ET
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Yes. Absolutely.
Luis Angulo
Luis Angulo May 13, 2021 6:05PM ET
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It is good that people talk about what Bitcoin could do! Musk only want attention!
Louis Lipps
Louis Lipps May 13, 2021 5:35PM ET
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I bet you wrote an article applauding Musk when he bought bitcoin because you thought it legitimized it lol.  Can't have it both ways buddy.
Sab Baby
SabSabBaby May 13, 2021 5:23PM ET
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Don't be silly.  You really think Elon the kid cares so much about the environment?  Nah, I bet he's shorted cryptos and manipulated the market that's all.  Rather than writing such a long essay for him, you might as well use the time wisely and report him to the SEC for manipulating the market.
Karl Kessler
Karl Kessler May 13, 2021 5:23PM ET
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I doubt he shorted cryptos. But let's say he did - are cryptos regulated by the SEC?
 
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