Crypto Mining Hit by Falling Bitcoin Prices and Rising Energy Costs

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At the end of 2021, the price of one Bitcoin exceeded $65,000. Since then, the price has fallen 70% and taken with it the fortunes of the once booming crypto mining industry.

These operations generate bitcoins and other cryptocurrencies, often using sprawling stacks of computers that require a ton of electricity to keep running.

Some states and municipalities have been vying for years to attract this industry. Others have been less welcoming, with critics accusing them of undermining clean energy goals across the country and around the world.

The crypto contingent at this month’s CES in Las Vegas seemed eager to show they weren’t fazed by the current moment.

Speakers on a panel titled How to Stay Warm in a Crypto Winter were introduced this way: They are not individuals who have been speaking over the past two years during all the madness.

In other words: No crypto tourists here but really OG cryptos.

This crypto winter began early last year, months before FTX collapsed in November and founder Sam Bankman-Fried was arrested.

From the CES convention floor, Sheila Warren, CEO of industry group Crypto Council for Innovation, acknowledged that these events have not helped public perception.

Still, what I definitely see here at CES is that it’s not going away,” she said. “He is definitely here to stay.

But the industry is certainly in trouble. This is especially true for companies that make money mining cryptocurrencies. Across North America, the shares of many of these companies have crashed, falling 90% or more in the past year.

Probably the most important thing is the price of bitcoin in general. It’s fundamentally a different business when your revenue is cut by 70%, said Ben Gagnon, director of mines at Canadian mining company Bitfarms.

Meanwhile, the cost of a key input skyrocketed as the global energy crisis took hold, said Ben Harper of Luxor Technologies, which provides software services to industry.

You’ve got this huge increase in electricity prices that’s happened over the last year, and it’s squeezed margins on the cost side, Harper said.

Back when everything was good, crypto mining farms were pumping money into more mining computers. Stacks of them were to be installed in the sprawling and very noisy facility Marketplace visited in Massena, New York a year ago.

More machines are chasing the same price these days, Luxors Harper added. The more mining there is on the number of fixed coins, obviously, the less revenue there is for any miner, he said.

Their collective crash has been welcomed by environmental groups organizing against energy-intensive crypto mining.

In upstate New York, the Seneca Lake Guardian group helped push for the first partial statewide moratorium on new crypto mining, arguing that such plans are at odds with the New York carbon reduction targets.

A bitcoin mining facility is seen in Niagara Falls, New York in October 2022. The state passed a partial moratorium on new crypto mining late last year. (Geoff Robins/AFP via Getty Images)

Yvonne Taylor said the crypto work has helped her group gain traction in their local fight against a crypto miner operating at a fossil fuel power plant in their community.

It’s pretty rewarding because we’ve been sounding the alarm and shouting our concerns for years about this facility,” Taylor said.

North of the border, two Canadian provinces, Manitoba and Quebec, use different tactics to limit crypto mining.

And while there are still green pastures for miners, including states that offer them subsidies, crypto investor Bradley Tusk of Tusk Ventures warns the industry needs a wake-up call.

They need to become much more politically sophisticated. If they don’t start being smarter, more proactive and more aggressive, they’ll be completely banned from doing what they do entirely, Tusk said.

Tusk added that this is true for crypto miners and the crypto industry as a whole. If you don’t intervene, you will be devastated.

Although there is new legislation to crack down on crypto mining nationwide, for opponents like Thomas Cmar, senior counsel at Earthjustice, the effort against the industry has largely been a state-by-state fight. State.

They are chasing electricity prices, Smar said. They seek to use large volumes of electricity, regardless of their origin, at a very critical time for our country’s climate policies.

Even after a tough year, there is still plenty of crypto mining activity, Cmar said. And if crypto miners lose in one state or province, many are ready to pack up and move to another.

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