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Fans of digital currencies have always touted it as a way to escape the global financial system — and from the powerful interests that control it.
Now, in a strange turn of events, these decentralized currencies have been embraced by the very center of power in the world: the White House.
President Donald Trump has promised to make the U.S. the crypto capital of the world, the Trump family has a crypto business called World Liberty Financial and meme coin, and the older sons co-founded a publicly-traded bitcoin mining firm called American Bitcoin (ABTC).
Shark Tank star Kevin O’Leary is also a crypto investor and proselytizer, and in a recent conversation with Moneywise he discussed his stake in Bitcoin mining firm Bitzero, which began trading on the Canadian Securities Exchange this week.
At a time when power costs are surging in the U.S. — thanks largely to a demand explosion caused by the twin phenomena of Bitcoin mining and the AI data-center boom — Bitcoin mining companies are looking uniquely well placed since they secured access to electricity a while ago.
“We’re doing it in West Texas, using some of the lowest energy costs,” said Eric Trump to Yahoo Finance recently about American Bitcoin (1).
O’Leary said he was attracted to Bitzero because he views it as “really a power company” that boasts “some very advantageous power contracts over long periods of time” that could usher the company in the AI data-center space as well. A few other miners like CleanSpark (CLSK) and IREN (IREN) have already pivoted to AI.
“There is no power on the grid anymore,” O’Leary said, talking about the shortages authorities are dealing with. “You can’t set up data mining or AI data centers or Bitcoin mining if the ratepayer in the region or the town you’re setting it up in sees an increase in rates … In fact, it looks like right now Canada is probably going to be a major source of power because there’s not much left in the U.S.”
Both the Trump family and O’Leary have talked about leveraging cheap power for success in Bitcoin mining, but there’s one key difference: the source of the power.
Here’s how their strategies differ and how you can also invest in this area.
In 2021, China cracked down on cryptocurrencies and banned Bitcoin mining and trading. Since then, the U.S. has taken the title of the world’s biggest Bitcoin mining hub, accounting for about 75% of reported activity, according to the Cambridge Centre for Alternative Finance (2).
In the U.S., the Federal Reserve decides how much money should be minted each year. But cryptocurrencies like Bitcoin are decentralized and no specific body or organization controls them.
So how do new bitcoins enter the economy? They’re mined.
If you’re picturing a worker with a pickaxe, replace the worker with a computer and the pickaxe with computing power.
Bitcoin mining plants operate tens of thousands of computers day and night to solve complicated mathematical problems in order to add a transaction “block” to the public bitcoin ledger, which is known as the blockchain. As a reward, they are granted newly minted bitcoins.
The higher the price of Bitcoin, the more incentive to mine, and the price is up over 400% in the last five years.
The total Bitcoin supply is capped at 21 million, and there are currently about 19.9 million in circulation today. As the price rose, mining became more profitable, which led to more miners competing to solve blocks and an increase in overall electricity use.
From mid-2022 to mid-2023, the 34 largest mines in the U.S. consumed 32.3 terawatt-hours of electricity, 33% more than Los Angeles and enough for three to six million homes, according to one study published in Nature Communications (3). Worse still, 85% of this power came from fossil fuels.
Most of the mines were in Texas, New York, Georgia, Pennsylvania and North Dakota. Locals have complained about a constant din from the mining rigs, and lawmakers are concerned about how they’re affecting the utility bills and air quality of residents.
Eric Trump has traveled the world talking about American Bitcoin, which he is a stakeholder in along with his older brother, Donald Trump Jr.. On stage at the Consensus conference in Toronto earlier this year, he emphasized that the Trump administration’s pro-fossil-fuel energy policies were going to help crypto mining.
“We believe we have the cheapest energy anywhere in the country, so much of it coming out of West Texas. We have a president of the United States who actually believes in having a proper energy policy … where he wants the cheapest energy of anywhere in the world because that’s going to fuel all the innovation that we’re talking about right now,” he said. “Go try and mine Bitcoin in France. Go try and mine Bitcoin in Scotland … you’re just never going to do it. The energy price is too high.”
Trump has focused on rolling back clean energy regulations to bring energy prices down. He has also attacked the clean energy industry, shutting down projects and claiming it’s the reason for high electricity prices, even though the data undermines that argument.
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O’Leary on the other hand says low-cost sustainable energy, which Bitzero champions, is the future of Bitcoin mining.
Founded in 2021, the Vancouver-based company has four data centers for mining in three countries — Norway, Finland and the U.S. — and, the CEO told Moneywise, they use “100% renewable energy.”
The company said the currently available energy mix at its remote 184-acre North Dakota site includes wind, natural gas and grid sources. Natural gas is considered much cleaner than other fossil fuels like coal, but it isn’t strictly a renewable source unless it’s produced from organic waste. Bitzero hopes to use only renewable energy when the site becomes operational.
This has been the direction the industry has been moving in. A global survey by the Cambridge Centre for Alternative Finance showed that miners’ electricity mix is predominantly sustainable (52.4%), with renewables accounting for 42.6% and nuclear accounting for 9.8%. Natural gas has also replaced coal as the single largest energy source used in Bitcoin mining.
There are many bitcoin mining firms that are publicly-listed in the U.S., like Riot Blockchain (RIOT), IREN (IREN), Marathon Digital Holdings (MARA), Cipher Mining (CIFR), CleanSpark (CLSK), Bitdeer (BTDR) and TeraWulf (WULF).
When deciding whether or not to invest, it’s important to consider companies’ fundamentals, like costs per coin mined. O’Leary says he looks at power contracts: “What’s your power coming in at? It’s over 8 cents kWh? No thanks.”
You may also choose for ideological or strategic reasons to look at how they source their energy and if that aligns with your values and expectations of how policies are going to look in the future. For example, IREN claims to use 100% renewable energy at its data centers. Despite its name, CleanSpark runs on “low-carbon power” and not 100% renewable energy.
These companies do remain very vulnerable to the price of bitcoin plummetting. The total market cap of bitcoin miners has collapsed from over $90 billion in mid-October to around $55 billion today, according to Bitcoin Mining Stock (4).
However, they may have the opportunity of repurposing their computing capacity for AI and other uses. JPMorgan analysts recently published a note highlighting the flurry of deals as crypto miners convert to high-performance computing (HPC) power providers.
The investment bank lifted its stock ratings on Cipher Mining and CleanSpark to “overweight,” citing the former’s recent 410 MW of HPC contracts and the latter’s 200 MW of critical-IT potential at its newly acquired 285-MW Texas site, according to The Block (5).
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Yahoo Finance/YouTube (1); Cambridge Centre for Alternative Finance (2); Nature communications (3); Bitcoin Mining Stock (4; The Block (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.