11/06/2023 0 Comments

1. How the future of cryptocurrency mining is playing out in rural America

An unassuming former paper mill in the foothills of eastern Appalachia is buzzing with a new kind of activity these days: dozens of shipping containers full of computers now populate the facility, all of them mining cryptocurrency.

Standard Power, a utility company, opened the site located in Coshocton, Ohio, last year. The town is better known for being a prime deer hunting destination than for advanced data processing facilities – but that may be about to change. Cryptocurrency miners have long been criticised for their environmental impact, with mining’s “proof of work” computational operations requiring vast amounts of energy.

A single Bitcoin transaction requires as much energy as a typical US household uses in 73 days, according to The New York Times. The largest cryptocurrency mine in the US, located in Texas, uses as much electricity as three million households.

But nuclear energy could be the solution to this problem. This month, Standard Power announced a deal with NuScale, a nuclear power company, to run two data centres in Ohio and neighbouring Pennsylvania with “two small modular reactors” that would produce 2 gigawatts of clean energy.

“I think nuclear energy is the next frontier for power in communities generally speaking. It’s one of the cleanest and greenest energy sources we have,” says Andrew Burchwell of the Ohio Blockchain Council. “Nuclear is going to be one of the safest energy sources we have, and we should be leaning into it.”

In a ground-breaking move earlier this year, America’s first nuclear-powered Bitcoin-mining facility opened in Pennsylvania.

Cumulus Data launched a zero-carbon data centre facility in the north-eastern part of the state that, when fully operational, is expected to produce 475 megawatts of energy for Bitcoin miner TeraWulf.

“The Nautilus nuclear-powered mining facility benefits from what is arguably the lowest cost power in the sector,” TeraWulf chief executive Paul Prager said in March.

Cryptocurrency mining is becoming more prevalent in parts of rural America.

From Hardin, Montana – population 3,685 – to Rockdale, Texas – population 5,398 – and many towns in between, cryptocurrency mining companies have been lured to small American towns by a potent mix of cheap electricity, lax zoning regulations and China’s 2021 crackdown on cryptocurrency miners.

Cryptocurrency miners have vowed to get to net zero by 2030 and until now, some mining outfits have mitigated their carbon footprint by buying carbon offsets through forestry projects or methane capture efforts. Many cryptocurrencies such as SolarCoin and Powerledger have gone down the sustainability route in a bid to attract environmentally conscious customers and investors.

Currently, the Coshocton mine is run on shale natural gas. Massive gas reserves unlocked by fracking in recent years mean electricity is cheap in Appalachian Ohio. What’s more, Ohio is seen by some as a good place for Bitcoin mining in part because of its climate.

“Computers don’t like hot temperatures, so Ohio is a pretty pleasant place to host them,” says Mr Burchwell. Still, others, such as stock analysts, have sought to throw cold water over the Standard Power-NuScale Power deal, suggesting financing and other barriers could be an issue for both parties.

NuScale Power responded by stating such claims are “riddled with speculative statements with no basis in fact”.

2. Marathon Digital Holdings enhances Bitcoin mining operations

Marathon Digital Holdings reported a production of 1,202 Bitcoins in October, selling 961 to cover costs, with a remaining holding of 13,396 unrestricted BTC as of month-end.

Marathon Digital Holdings, Inc., a major player in the Bitcoin mining sector, has shared a snapshot of its performance and ongoing developments for October 2023. In the latest update, the company detailed a slight increase in its energized hash rate, signaling continued growth in its mining capabilities.

Fred Thiel, Marathon’s Chairman and CEO, noted a 1% rise in the energized hash rate, now reaching 19.2 exahashes. This advancement is particularly attributed to the progress in the company’s Garden City, Texas facility, which contributed 4.1 exahashes. As this site approaches full operational capacity, Marathon is set to exceed its target of 23 exahashes, aiming to become the largest Bitcoin miner in North America.

Marathon’s presence is not just growing in the U.S.; its international ventures are also expanding, with 2.3 exahashes already functioning in Abu Dhabi. Further expansion is expected by the year’s end.

The company is also exploring innovative mining solutions to improve sustainability and reduce energy costs. A pilot project in Utah is now mining Bitcoin (BTC) using methane gas from landfills, reflecting Marathon’s commitment to environmental responsibility and renewable energy use.

For October, Marathon’s U.S. operations produced 1,184 bitcoins, marking a significant year-over-year increase. The efficiency of Marathon’s fleet is also set to improve, based on the manufacturer’s specifications, which is a crucial factor in mining performance.

Financially, Marathon displayed robust health, ending the month with $156.1 million in unrestricted cash and cash equivalents. Additionally, the company strategically sold some of its Bitcoin holdings to support operations and maintain financial stability.

3. Bitcoin’s pullback — warning sign or blip on the radar?

A broad selloff has hit cryptocurrency markets over the past 24 hours, with the overall market capitalization falling nearly 3% to $1.27 trillion. The pullback comes after digital asset prices rallied strongly through October, with greed sentiment recently hitting two-year highs according to the Crypto Fear and Greed index.

According to Alex Kuptsikevich, senior market analyst at FxPro, the current dynamics fit the narrative of Bitcoin (BTC) as a safe haven asset, with rising demand for equities playing against the largest cryptocurrency. However, Kuptsikevich cautions against relying too heavily on Bitcoin’s defensive status, arguing the cryptocurrency remains highly sensitive to changes in broader risk appetite and often leads such market swings.

According to Kuptsikevich, Bitcoin likely entered a correction phase amid the broader risk-off move, but its longer-term bullish trajectory remains intact while prices hold above $32,300. Ethereum has fallen back below its 200-day moving average around $1,770, leaving it vulnerable to a decline toward $1,740 barring a swift reversal of sentiment.

The pullback across crypto markets comes despite a generally favorable news backdrop. Comments from market strategist Michael van de Poppe expressed confidence the Federal Reserve has completed its monetary policy tightening campaign, which could provide tailwinds to risk assets including Bitcoin.

Investment giant Fidelity continued its praise of Bitcoin as a burgeoning savings technology and inflation hedge. Corporate Bitcoin adoption continues, with MicroStrategy revealing additional BTC purchases last month.

However, regulatory scrutiny remains intensifying, particularly related to stablecoins like PYUSD which PayPal launched this summer without oversight. The SEC has reportedly opened an investigation into Paypal’s stablecoin, further illustrating the uncertain regulatory environment facing digital assets.

For now, the crypto pullback appears to be more of a breather than the start of a new bearish trend. But sustaining the massive gains of the past month could require continually favorable macro conditions. With recession risks lingering and central banks still plotting additional rate hikes, volatility likely persists for Bitcoin and altcoins.

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Harvey CHEN

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