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Thread: Bitcoin and the Coming Energy Crisis

  1. #1

    Bitcoin and the Coming Energy Crisis

    Hi everyone,

    I am new to posting in the forums, but I started writing on Substack with a liberty/market-centric newsletter. I’ll never forget Ron Paul’s first debate I saw in May 2007 as it introduced me to the world of Austrian Economics. I’m forever indebted to what that man has done for this country and for so many of us here.

    My goal is to write commentary on financial markets and the political risks here and abroad for businesses and individuals. My background is in energy dispatching—managing and monitoring power plant outputs to help balance and maintain the power grid’s operation. With that, I thought some of my initial work would be on electricity markets. I wrote a piece on Bitcoin and power grids given the looming energy crises we are likely facing in the coming months. Here’s my piece, and the Substack link below if any are interested in my other writings. Let me know what you think. Thank you!

    Bitcoin and the Coming Energy Crisis

    Bitcoin, the high-flying honey badger asset, may be facing its Blackout Swan Event. How will the crypto industry tackle an onslaught of political headwinds as regulators look for scapegoats?

    When news broke that Elon Musk would debut as host for Saturday Night Live on May 8, 2021, interest in cryptocurrencies was at a fever pitch. Dogecoin was the meme token of the day having catapulted the fortunes of eager loyalists to new heights ahead of the much anticipated event. The hype buoyed the entire sector as Bitcoin was lifted to $60,000/coin.1

    It became the classic buy-the-rumor-sell-the-fact moment as Dogecoin’s momentum began eroding minutes before the go live extravaganza. Doge had crashed 50% just four days later and Bitcoin plunged by over $20,000/coin 11 days post-event. The ebullient crypto-bears were certain the bubble had burst. Undeterred crypto-bulls continued the cause, pressing ahead as just another growing pain along the revolutionary technology’s trajectory to Alpha Centauri and beyond.

    Fast forward to early October 2021, crypto-mania is once again in full swing following the SNL-induced “Elon Correction.” Prices for cryptocurrencies began surging in mid-July after Bitcoin dipped below $30,000/coin. Rotations into the crypto majors Bitcoin and Ethereum have sparked new hope and excitement for the industry just as the bulls predicted. Dogecoin is still floundering at $0.25, or one-third of its all-time high reached pre-SNL leaving Doge “hodlers” behind at least in this round of the recovery.2

    Energy consumption to support the Bitcoin network, a lagging indicator for price movement, is rallying per the University of Cambridge Bitcoin Electricity Consumption Index.3 According to this index, Bitcoin would effectively rank as the 34th country by electricity consumption just behind the Netherlands.4 This will set the stage for what I believe is the next major headwind for cryptocurrencies globally.

    Rising energy prices have begun to make headlines across the world. Ahead of winter in the United States, natural gas monthly contracts are trading at prices we haven’t seen since for this time of year since September 2009 at over $6/MMBtu.5 As winter approaches, liquefied natural gas (LNG) exports from the US are sailing into Asia and Europe as countries scramble to secure reserves ahead of peak usage months.6

    Natural gas is commonly the fuel that serves as the marginal source for electricity generation given the inherent characteristics of natural gas power plants. They are often the most responsive power generators available to grid operators to meet the next megawatt of demand by consumers. At all times the grid must be balanced between supply and demand to ensure reliability of the system—keeping the lights on and the beer cold.

    This is where cryptocurrencies may face their biggest political risks yet. Countries in the northern hemisphere who experience anything but mild winters will have stressed power grids and fuel supplies to contend with. With economic stimulus wearing off in the United States and political relationships facing immense strain globally, the world enters a precarious situation ahead of a potential energy crisis. During times like these, politicians and regulators will be eagerly looking for scapegoats to deflect blame. Bitcoin, already consuming as much electricity as all the refrigerators in the United States, may be the low-hanging fruit they are looking for.7

    While Bitcoin has been the most tenacious asset in recent memory, a healthy dose of caution may be warranted. If the United States is forced to shutdown or curtail LNG exports to Europe, watch out. Difficult decisions will have to be made as grid operators are obsessed with one primary task: reliability. China has already limited manufacturing output by shutting down factories and limiting days of operation.8

    We are in October. This is a low energy use time as we transition from summer air conditioning load. Industrial output is the first to be curtailed ahead of residential customers viewed as absolute firm load—demand you only cut as a last resort. Given that consideration, Bitcoin miners and their server farms may be the most politically palatable to face renewed criticism. If regulators choose to scrutinize these mining entities, to pull the plug on these hubs, Bitcoin will have to once again regroup and reassess as it has countless times past. This time, however, may be different.

    https://powerandmarkets.substack.com...-energy-crisis



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  3. #2
    There is a lot of fake news about the amount of energy consumption that bitcoin miners use..

    That said, it is fairly energy intensive but there are productive ways to get around it. Electrical generation capacity is set for peak demand. When there is not peak demand, they shut down the power generating station. It could be coal, in which case, some people claim that shutting down the coal plant and starting it back up actually produces more CO2 than just keeping it running. The coal plant could utilize bitcoin miners to keep the plant running, make extra money, all while potentially reducing CO2 emissions. Then when demand for the energy goes up, they can simply shut down the mining rigs instead.

    The same goes for green energy, including nuclear.

    Gen 4 nuclear energy is the future. I recommend looking into that topic, and writing about it. The plants they are designing now have several designs, including one that uses spent nuclear waste from Gen 2 and Gen 3 plants, and produces practically zero waste. Another design produces practically zero waste from the nuclear fuel. They are also much safer, and do not have meltdowns of the reactor - the meltdown was designed out of the system. They can be built much smaller, which creates less of a hazard and don't need to be next to large bodies of water. They can be built practically anywhere.

    Crypto is here to stay.
    Last edited by dannno; 10-10-2021 at 11:29 PM.
    "He's talkin' to his gut like it's a person!!" -me
    "dumpster diving isn't professional." - angelatc
    "You don't need a medical degree to spot obvious bullshit, that's actually a separate skill." -Scott Adams
    "When you are divided, and angry, and controlled, you target those 'different' from you, not those responsible [controllers]" -Q

    "Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul

    "Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."

  4. #3
    You must spread some Reputation around before giving it to dannno again.

  5. #4
    Quote Originally Posted by dannno;[URL="tel:7064443"
    7064443[/URL]]There is a lot of fake news about the amount of energy consumption that bitcoin miners use..

    That said, it is fairly energy intensive but there are productive ways to get around it. Electrical generation capacity is set for peak demand. When there is not peak demand, they shut down the power generating station. It could be coal, in which case, some people claim that shutting down the coal plant and starting it back up actually produces more CO2 than just keeping it running. The coal plant could utilize bitcoin miners to keep the plant running, make extra money, all while potentially reducing CO2 emissions. Then when demand for the energy goes up, they can simply shut down the mining rigs instead.

    The same goes for green energy, including nuclear.

    Gen 4 nuclear energy is the future. I recommend looking into that topic, and writing about it. The plants they are designing now have several designs, including one that uses spent nuclear waste from Gen 2 and Gen 3 plants, and produces practically zero waste. Another design produces practically zero waste from the nuclear fuel. They are also much safer, and do not have meltdowns of the reactor - the meltdown was designed out of the system. They can be built much smaller, which creates less of a hazard and don't need to be next to large bodies of water. They can be built practically anywhere.

    Crypto is here to stay.
    Some good points; however, we are 2 months away from winter. Nuclear power plants are on life support in the US with a number of retirements and decommissioning of units over the past 5 years. Needless to say, the political appetite for new nuclear just isn’t here stateside even if long term prospects are positive.

    The concern is what happens this winter. Coal inventories are drastically below the 5 year average across major countries. China has curtailed manufacturing as a result. Natural gas prices are surging globally with fears of an intense winter in the northern hemisphere due to already cold polar temperatures. This past February the US had its largest controlled rolling blackouts in US history to keep the power grids from collapsing.

    I think we are one European energy crisis away from Bitcoin facing heavy scrutiny for causing grid strain. The energy consumption lands it as effectively the 34th country. Just knowing how politicians act and react using scapegoats makes crypto a very low hanging fruit given prevailing regulatory eagerness already. I understand the networks are decentralized; however, the big miners are sitting ducks for governments to pull the plug at anytime. Imagine 450 million Europeans facing a harsh winter with an energy crisis. You think politicians aren’t going to vilify and yank the rug out from crypto?

  6. #5
    There is no "energy crisis"
    __________________________________________________ ________________
    "A politician will do almost anything to keep their job, even become a patriot" - Hearst

  7. #6
    Quote Originally Posted by Matt Collins;[URL="tel:7064488"
    7064488[/URL]]There is no "energy crisis"
    Highest $/MMBtu for nat gas domestically since 2009; European gas market hitting all-time highs.

    US had its largest controlled blackouts in U.S. history in February 2021. It’s a problem.

  8. #7
    Quote Originally Posted by Power and Markets View Post
    Highest $/MMBtu for nat gas domestically since 2009; European gas market hitting all-time highs.

    US had its largest controlled blackouts in U.S. history in February 2021. It’s a problem.
    What he's trying to say is it's a manufactured crisis, easily solved by an armistice in the War on Coal.
    Quote Originally Posted by Swordsmyth View Post
    We believe our lying eyes...

  9. #8
    Quote Originally Posted by acptulsa;[URL="tel:7064501"
    7064501[/URL]]What he's trying to say is it's a manufactured crisis, easily solved by an armistice in the War on Coal.
    Yeah, that’s fair. Problem is more coal power plants are scheduled to be retired. And utilities’ boards of directors are such spineless politicians they fall over themselves trying to virtue signal and go as green as possible a day sooner than the next guy. So the problem isn’t just at a statutory/regulatory level, but it’s permeated throughout the industry and the upper managements are infatuated with making a splash by touting their eco-responsibility.

    It’ll take a major energy crisis which is the storm we are sleepwalking into before we reassess and reconsider these shortsighted goals and mandates.



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  11. #9
    Coal is my friend . People who oppose it are the enemy and must be treated as such . Simple as that .
    Do something Danke

  12. #10
    A change of political administration is all that is necessary to turn a surplus into a deficit.

  13. #11
    Quote Originally Posted by Power and Markets View Post
    Yeah, that’s fair. Problem is more coal power plants are scheduled to be retired. And utilities’ boards of directors are such spineless politicians they fall over themselves trying to virtue signal and go as green as possible a day sooner than the next guy. So the problem isn’t just at a statutory/regulatory level, but it’s permeated throughout the industry and the upper managements are infatuated with making a splash by touting their eco-responsibility.

    It’ll take a major energy crisis which is the storm we are sleepwalking into before we reassess and reconsider these shortsighted goals and mandates.
    I think one reason price inflation hasn't kept up with monetary inflation over the last 12 years is due to the low cost of oil. Oil just broke $80 today and if it keeps going up prices will really start rising. I've been saying for years that the first thing that'll get everyone's "inflationary attention" is the price of gas.

  14. #12
    Quote Originally Posted by oyarde;[URL="tel:7064530"
    7064530[/URL]]Coal is my friend . People who oppose it are the enemy and must be treated as such . Simple as that .
    only a Sith deals in absolutes

  15. #13
    Quote Originally Posted by Madison320 View Post
    I think one reason price inflation hasn't kept up with monetary inflation over the last 12 years is due to the low cost of oil. Oil just broke $80 today and if it keeps going up prices will really start rising. I've been saying for years that the first thing that'll get everyone's "inflationary attention" is the price of gas.
    That’s a great point. Now that you mention it, gas is probably the most familiar price anyone notices. You fill up once a week, or more. The unit price is quoted up front in $/gallon and only after you fill up do you see the cost of your purchase. Every other product or service on the market is quoted in reverse. Therefore the merchant cannot obscure the purchase price by adjusting the volume of product you get. Toilet paper comes in so many different marketing adjectives it’s one of the most confusing things to buy given the multiple adjustments being made. Roll size, number of rolls, how many plies, etc.

    Great reply! You gave me some ideas to chew on. Gives me another idea for an article. Thank you!



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