Get your virtual pickax and shovel!
An interview and snapshot of the evolving domestic crypto mining landscape.
Following last week's letter on China's recent mining developments, we have a chance to look at the developments on domestic soil.
FirstWatch Crypto gained insights from an energy industry expert exploring Bitcoin mining. The advantage: direct access to natural gas. We will explore some quotes from the conversation and dig into the mining landscape in the United States. Per the industry expert's request, all references are anonymized.
Why is mining attractive to U.S. companies?
Crypto mining in the United States requires power and lots of it. Mining is energy-intensive in order to mint new coins and uphold the security of the existing network. As China has shuttered its Bitcoin miners, these miners need a new home.
Enter: the United States.
Deregulated power grids, political support, and growing renewable energy capacity make the U.S. an appealing location. For oil and gas facilities, with direct access to energy sources, the current mining climate offers a unique opportunity. Our industry expert agrees.
"I think there'll be more companies, in the next two to four years who are energy businesses at their core and just transitioning to these other markets. For miners to enter into the energy business that's a whole different venture altogether, which requires a completely different skill set. I can see larger companies that look like us, exploring [mining] as a new end market."
Companies like Upstream Data have identified a market need to solve the problem of energy access: the company manufactures and supplies portable mining solutions for oil and gas facilities. The facilities can be easily transported to new wells or even across oceans, where mining operations can continue.
So where will miners go?
Particular states have taken a markedly pro-Bitcoin stance. Colorado, Texas, California, Florida, and Ohio top the list of states with crypto-friendly approaches, especially related to business and custody. Wyoming legislators too have passed several laws enabling businesses to operate with cryptocurrencies. It comes down to energy access.
Miners are looking for consistently reliable energy sources. You reduce your carbon footprint by taking that gas that was flaring into the air and utilizing it for mining purposes.
One big question left to answer is how miners will use renewable energy. Fossil fuels are not renewable. But efficiently retooling the extraction of oil and gas reduces the carbon footprint of mining. While solar and wind energy are the least expensive energy sources, they have crucial issues of scalability and reliability that are yet to be overcome effectively.
Regardless of where the displaced Chinese miners move, we will continue to see crypto-friendly legislation.
Zoom in: Texas Mining
"As we started to hear more of a trend: the miners who are successful are the miners who are able to control their energy inputs. Having access to feedstock to power the generator, you're able to control your energy input, which is the largest cost for any miner or any operator in the mining business."
As stated, access to cheap and reliable feedstock is crucial to mining success. To find that in the U.S., people are looking to Texas.
Energy in Texas is not just among the cheapest in the country, but is some of the cheapest energy in the world. It's also deregulated: the state operates its own energy grid. Much of this has been advantageous to the Bitcoin mining industry, however, the reliability of Texas' power grid has been called into question after being shut down by winter storms. Electricity prices surged exponentially. If history repeats itself, Bitcoin operations could then become incredibly expensive.
One of the biggest crypto stories will unfold over the next few months as Chinese miners spread around the world. The United States and its energy companies are poised to lead the way.
Some key takeaways:
FirstWatch Crypto spoke with an energy industry expert who is exploring Bitcoin mining and sees an opportunity for other energy companies to enter the space in the coming years.
Oil and gas companies that decide to enter the mining space have an upper hand: access to the energy itself.
Particular states have created Bitcoin-friendly legislation to attract displaced Chinese miners. Texas’ unique energy situation could provide ample opportunity to create mining businesses in the state.
Resources:
Lots of miners are heading to Texas.
Why Wyoming is the promised land for Bitcoin investors.
Why Texas should be careful in attracting miners.
Bitcoin miners’ revenue jumps by 50% in four days.
U.S. Bitcoin Miner Blockware raises $25M and builds a facility in Kentucky.
➡️ About FirstWatch Crypto ⬅️
FirstWatch Crypto was started by Dan McGlinn (@DigitalDanMcG)and John "Blaize" Hrabrick (@blaizebitcoin) who have been investing in the space for a combined 8 years. FirstWatch Crypto is on a mission to simplify the crypto investment landscape.
Disclaimer: None of the above is investment advice. This blog is published for entertainment and informational purposes only. The ideas expressed are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommended you seek professional advice from someone who is authorized to provide investment advice. You should always do your own research before investing in cryptocurrencies. It is a volatile market.