Bitcoin mining despite the sales pitch has been an absolute nightmare for grids as well as being a crypto carbon bomb for the environment.

While it’s often sold as a support for the grid or even a battery as it does have the capability of accepting a digital signal at times of grid stress to simply turn off and remove the heavy load it applies to the grid, It’s not actually a support mechanism it as it causes demand to the grid that would otherwise not be there and then when needed can simply away. That is kind of like stepping on someone’s throat and letting up right before they run out of air, then saying “your welcome”. And batteries store energy for use at a later time they don`t just consume it.

Its completely understandable why many got behind the idea of turning their basement, garage or even business in to essentially a mint, printing a new type of currency that didn’t even exist before. Improvements in the mining technology made it affordable for the every day hobbyist or investor to get involved in this business but the cost of energy, impact on the grid, Trump era banking deregulation and the high emissions produced with only a benefit to the miner make this a risky business.

After the financial crisis of 2008 a lot of studying and negotiating was done to come up with regulations to try and prevent it from happening again and one of the results was the Dodd- Frank  legislation that amongst other thing required banks worth over 50 Billion dollars (too big to fail) to have certain amounts of liquidity and capitalization ratios to reduce their risk. But then in 2018 unfortunately this was essentially undone by moving that market vale number up to 200 billion dollars which included very few banks. Now after covid had governments flooding the economy with money and inflation is a real problem, we have seen the Federal Reserve trying to cool down the economy with large interest rate hikes that have undermined the positions of some banks and businesses. Especially ones with too much risk like Silicone Valley Bank that have been heavily involved with crypto exchanges and mining operations for years. Now that all deposit accounts across the US have been backed by the Federal Reserve in a historic move we see crypto currencies stabilizing. But its pretty fair to say SVBs days of lending are probably done and with that lending market drying up for everyone and the cost of energy steadily rising is Crypto mining about to hit a harsh reality?

While the state of Texas has had some customers complaining about struggling to get access due to the grid seeing too much demand by Crypto miners near by, it has been very much supported as a hedge by the oil industry looking to produce energy from excess flare gas or from wells not worth pumping and shipping they simply feed local generators to feed mining production. Its a logical business approach but another carbon bomb for the environment burning fossil fuels that would not have been burned otherwise.

” Miners in the state are currently using around 2 gigawatts (GW) of energy, with peak capacity for the state topping out at 80 GW. By 2026 it’s estimated that Texas bitcoin miners will draw as much as 29 GW—four times as much as the whole of New York City. ” – Wired

This is a grid that reached near collapse due to lack of energy being available just two years ago and while that grid is getting some investment and added generation from mostly renewable sources. This literally exacerbates the intermittency impact of renewables. I have had quite a few discussions with crypto miners that wanted to take a look at a more sustainable way of mining but when it comes down to it, the economics fall apart when they can not receive a consistent supply of energy which means tying to the grid or a local natural gas generator.

This seems unlikely to be achievable with current energy costs, grid impacts and access to capital for this industry, but stranger things have happened.

“Crypto-asset activity in the United States is estimated to result in approximately 25 to 50 Mt CO2/y, which is 0.4% to 0.8% of total U.S. greenhouse gas emissions. This range of emissions is similar to emissions from diesel fuel used in railroads in the United States.” White House source

With most of this being Texas can we really see adding of upwards of 200 Mt a year and think this is anything but a carbon bomb for the environment at a time when we need to focus on reducing not adding.

Over the past 6 months we have seen everything from the FTX failure to several crypto currencies like Terra lose 10s of millions in value overnight, to questions as to if some of the so called stable coins like tether actually have reserves in place for these coins.

This is a trillion dollar industry and if it tips over there will be a big impact but it seems inevitable at this point that its best days are behind it.