Monday, February 12, 2018

Bitcoin Mining in My Back Yard, and Bitcoin Outperforms Safety Trades

Lately I seem to be finding Wall Street Journal articles that are not hidden behind a pay wall, and I have no idea why. Maybe this article is just "free" content, or maybe my VPN is confusing their website and they just give out free access to Mexico-based IP addresses. Long story short, I don't know if you'll be able to see this article or not, but I hope you can.

Anyway, it's about Bitcoin mining going on right here in Washington state, not very far from where I live. The reason: we have hydropower, and hydro-generated kilowatts are cheap.

This has attracted several operations to my state, one of which I own shares in, MGT Capital Investments (they appear at the very end of the article).

The article, if you are able to access it, can be found here: "Bitcoin Mania Triggers Miner Influx to Rural Washington."

In part the article details the growing pains that local utility providers are going through because of this. The server farms that mine for coins can suck up a lot of power, and the main issue there is delivery: in many cases the infrastructure required to deliver that power doesn't exist and will have to be built. But there's hesitation on the part of the providers because they're worried about the mining industry drying up and blowing away, leaving them with millions in infrastructure investment and no way to earn a return on the investment.

The article also mentions the long-time locals that live in this area, who are expressing concern over the possibility that power rates will rise as the excess supply in the system gets used up, which certainly could happen.

Then there's the steady drumbeat going on out there in the FUD media about Bitcoin's power usage versus the environment (this article is just the latest one I found by doing a Google search for "bitcoin" and clicking on the news tab; at least one of these appears there every day now). But like so many criticisms of this type, it's mostly just cherry-picked, out-of-context bullshit.

All the same, that kind of propaganda combined with a "crisis" of increasing power rates is all the cover that a state government like the one we have in Olympia needs to step in and "do something about it" (in this case, probably by enacting a proposed 'carbon tax' in this state, which will add $3.3 billion to the cost of living here, ironically by making power more expensive...).

Put that together and I'm skeptical of the future of crypto mining in my state. This place is already very hostile to the technology, having enacted "consumer protections" that limit our choices of exchanges (we can pretty much only use Coinbase and Gemini here; other exchanges can apply to do business in Washington, but of course they must pay enormous fees to our state government, "for our safety..."). This prompted many crypto operations to up and leave Washington a few years ago, or block access to their sites (Shapeshift is one example: if you try to access their site from an IP address in this state, you get a message that basically says "we refuse to do business with you, because of your government," which puts us on par with North Korea, as the message also mentions).

So then, we'll see what the future holds here (but maybe I'll be doing so from a comfortable distance...).


Second topic, very briefly, I came across a bit more attention being turned toward Bitcoin's evolving relationship relative to other asset classes, which is in line with what I speculated on a few days ago, that Bitcoin may be growing into a replacement for gold in our new cyber era:
"Bitcoin started its free-fall in mid-December when it traded just under $20,000 until a few days ago when it bottomed right around $6,000. The 70% drop ended just after the Dow 30 Industrials had its first 1,000 point plus decline last week. If there ever was a time for Bitcoin to continue its slide to $1,000 or less this seemed like this was the “right” time. However, Bitcoin outperformed not just the equity markets from Tuesday to Friday but also gold and the U.S. 10 year Treasury bond." -- C. Jones
 The full article can be found here: "Bitcoin Became A Safety Trade Last Week."


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