Bitcoin Mining as a Bet on the Future of Sustainable Energy
A shift is occurring within the cryptocurrency industry in how Bitcoin mining is regarded. Miners are starting to find consistently more efficient ways of using energy to mine Bitcoin, and it is losing its ecological wasteful image.
Fidelity Investments hosted a mining summit in early May, which was news enough in itself. The financial services company has been making headway in the cryptocurrency space and recently launched custodial services for Bitcoin to institutional clients. Trading is expected to follow soon thereafter.
That this financial giant has begun to embrace Bitcoin is news enough in its own way, but even more important is the shift regarding energy usage by Bitcoin miners. A large part of the world still seems to think that Bitcoin mining is a major environmental issue, but with 0.26% of the world’s energy consumption, this seems a little unfair.
Incentives in Place for Lower Cost of Energy
More importantly, Bitcoin puts a direct incentive out there for companies that can find cheaper ways of producing energy. Soluna is one such company. They are putting $2.5 billion into developing a wind farm in Morocco where the remainder of the energy left over after running the mining rigs will go to the local grid.
Hydropower is one of the largest sources of energy for Bitcoin mining in China, as opposed to the view of it being “dirty Chinese coal”. Many oil companies are also finding out they can monetize the extra venting gas they pick up by converting it into energy that can be used to mine Bitcoin. This results in far fewer carbon emissions in the atmosphere and continues incentives to produce efficient energy.
The fact remains that on a large enough scale, mining still seems to be the most cost-effective way to purchase Bitcoin. The fact that big companies are looking at Bitcoin as if there is tons of upside is very important. Additionally, since the retail to institutional ratio determines a large part of the volatility, this would help stabilize the currency so we don’t get trading ranges of 25% (look at trading over the last few weeks).
Scalability protocols like the Lightning Network may be coming, but they have bugs that need to be ironed out. Focusing on the mining side of the equation is like trying to get a deal on Bitcoin rather than waiting for Bitcoin’s value to go up (which is what investing based on scalability developments would be).
What is the Play?
So if mining is becoming more efficient and has the potential to improve energy use, how do we profit from this?
Soluna is not publicly traded and Bcause LLC, another mining startup, isn’t public either. Argo Mining trades publicly on the London Stock Exchange and is just hitting breakeven on their direct mining. Projects like this are expected to change the entire way that Bitcoin and mining is viewed, but it is difficult to monetize them right now.
So basically, there isn’t any single company that stands out as being a great investment mining wise right now. The best recommendation I can make is to look out either for Bitcoin mining companies that go public and have a cheap cost of energy, or for oil companies that partner with Bitcoin mining companies. Both of these will allow for huge upside and are effectively a bet on the increase in the price of Bitcoin and decrease in the cost of energy.
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