Bitcoin Mining Uses a Higher Mix of Sustainable Energy Than Any Major Country or Industry

Bitcoin Mining Uses a Higher Mix of Sustainable Energy Than Any Major Country or Industry

On Thursday, HIVE Blockchain Technologies listed on Nasdaq (HVBT), providing U.S. investors access to Bitcoin and Ether mining.

As many of you know, HIVE became the first crypto miner to be traded publicly when it debuted on the TSX Venture almost four years ago. Its uplisting to Nasdaq, the world’s premiere tech stock exchange, represents the culmination of months of hard work by our team. I want to thank shareholders for their loyalty and patience.

That said, I believe the best is yet to come. We’re of the opinion that Ether 2.0 Proof of Stake (PoS) will take at least another two years before Ether mining is no longer financially attractive. That’s part of the reason why we’ve been expanding our enterprise cloud services focused on high-performance computing (HPC) workloads such as gaming, artificial intelligence (AI) and movie animation.

Toward that end, HIVE just agreed to join the NVIDIA Partner Network (NPN) as a cloud service provider, providing us access to the tech company’s ecosystem, partners, customers and deep industry expertise. We also substantially increased our computing capacity by buying NVIDIA graphics processing units (GPUs) with a total contract value of more than $66 million.

In the meantime, HIVE continues to hold its newly minted Bitcoin and Ether, mined using only 100% green renewable energy, in secure storage.

It’s important for investors to keep in mind that the crypto mining space is still incredibly volatile.

Whereas gold has a daily standard deviation of ±1%, Bitcoin has one of ±6%. By introducing our enterprise cloud service offerings, we hope to lower some of HIVE’s volatility while maintaining its attractive margins.

Bitcoin Network a Far Bigger Consumer of Sustainable Energy Than Fake News Reports

Besides being an NVIDIA cloud service provider, HIVE is proud to be a founding member of the Bitcoin Mining Council (BMC), the group conceived in May after recent talks between North American Bitcoin miners, Elon Musk and MicroStrategy co-founder and CEO Michael Saylor.

In the past couple of months, the global Bitcoin mining network has come under heightened scrutiny over its energy consumption. Critics, most notably Elon Musk, have tried making the case that Bitcoin uses an unacceptable amount of electricity generated by fossil fuels, with Musk going so far as to cancel Tesla’s policy of accepting the cryptocurrency as a form of payment.

Newly compiled research, though, proves just how unfounded these criticisms really are. In its very first report, the BMC released results of its survey of over 32% of the current global Bitcoin network, finding that participants are using electricity with a 67% sustainable power mix. Based on that data, the total sustainable power mix could be as high as 56%, making Bitcoin mining one of the most sustainable industries globally.

To put that in perspective, the U.S. currently uses electricity that’s only 30.5% sustainable. For China, that figure is less than 15%.

Take a look at the stunning chart below. Fake news makes Bitcoin out to be the biggest energy guzzler on the planet. On the contrary, its energy usage is negligible, as it consumes only 0.117% of total global electricity.

Global Bitcoin Mining Energy Use is Negligible

There may be many reasons why people spread misinformation about Bitcoin. Much of the misinformation may originate from Ripple, which is currently under investigation by the Securities and Exchange Commission (SEC). The fintech firm is believed to employ a great number of bots on Twitter and other social media platforms with the intent of tearing Bitcoin down in favor of its own XRP coin.

Expect Busy Roads and Skies this Fourth of July

This weekend marks America’s independence from Great Britain, and in many ways, it will also mark American families’ independence from the pandemic. The American Automobile Association (AAA) forecasts that holiday travel volume will rival that of 2019 volume, with 47.7 million people taking to the roads and skies. Car travel may even exceed 2019 levels.

Air passenger traffic, meanwhile, is expected to reach 90% of 2019 volume, bringing it as close to pre-pandemic levels as we’ve seen so far. In June, more than 56.7 million people were screened at U.S. airports, the greatest amount since February 2020, soon before the entire world economy went into lockdown.

Number of Air Passengers in the U.S. Touches Highest Level Since 2020

Unexpectedly strong demand is reflected in the performance of energy and manufacturing stocks in the first half of 2021. Among the leaders in the S&P 500 were oil exploration and production such as Marathon Oil (whose stock doubled in the six months ended June 30), Texas-based Diamondback Energy and Devon Energy, as well as manufacturers such as power generator-producer Generac and steel-producer Nucor.

Energy and Manufacturing stocks led S&P 500

Despite Labor Shortages, Factories Expanded at a Record Pace

All of this strong demand has put a strain on gas stations, some of which have already started seeing outages ahead of the July Fourth weekend. To be clear, this is the result of a labor shortage, not fuel shortage. According to National Tank Truck Carriers, the industry is short some 50,000 drivers right now.

Factories both here and abroad also continue to experience a labor shortage as suppliers struggle to keep up with a wave of new orders. Nonetheless, factories reported very strong growth in June, with some surveys indicating record or near-record levels of expansion. The IHS Markit Manufacturing PMI came in at 62.1, unchanged from May’s record reading, while the ISM Manufacturing PMI dipped slightly from 61.2 to 60.6

U.S. Manufacturers Continued to Expand

One of the most exciting manufacturing orders in recent memory happened this week when United Airlines put in an order for an incredible 270 new aircraft, including 200 Boeing Max jets and 70 Airbus 321neos. This represents the carrier’s largest such order in company history, and I see it as extremely bullish not just for United and Boeing but the commercial airline industry as a whole. United is positioning itself to capture market share as vaccination rates rise, travel restrictions are lifted and economies fully reopen.

I hope my Canadian readers had a wonderful Canada Day on Thursday, and to my American friends and family, Happy Independence Day!

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Index Summary

  • The major market indices finished up this week. The Dow Jones Industrial Average gained 1.02%. The S&P 500 Stock Index rose 1.67%, while the Nasdaq Composite climbed 1.94%. The Russell 2000 small capitalization index lost 1.23% this week.
  • The Hang Seng Composite lost 3.34% this week; while Taiwan was up 1.18% and the KOSPI fell 0.64%.
  • The 10-year Treasury bond yield fell 10 basis points to 6.49%.

Blockchain and Digital Currencies

 

Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was XinFin Network, rising 93.22%.
  • Mercado Bitcoin, the largest cryptocurrency exchange in Brazil, announced that it finished its Series B financing round, raising $200 million from the SoftBank Latin America Fund. The deal is the largest Series B round in Latin America’s history, and gives the company a $2.1 billion valuation. 2TM Group, the parent company of Mercado Bitcoin, reported that the company plans to further expand its operations in Latin American nations and is contemplating adding branches in Argentina, Chile, Colombia, and Mexico. Mercado Bitcoin added 700,000 new users between January and May 2021, boasting a total client base of 2.8 million, and saw its trading volume balloon to $5 billion, which surpassed the total for its first seven years of operations combined.
  • Ukraine’s parliament, Verkhovna Rada, passed a law that considers the country’s potential central bank digital currency (CBDC) to be like cash or a bank account. The law describes the electronic Ukrainian hryvnia, which has not been launched yet, being on par with cash, bank accounts, and electronic payments, and as a unit of account in Ukraine. The National Bank of Ukraine (NBU) launched its efforts to create a CBDC in 2018 and has a prototype on the Stellar Blockchain, but progress has been stalled since it published a report on the advantages and disadvantages of a CBDC in September 2019.

Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performer for the week was Quant, down 22.65%.
  • Customer complaints against major U.S. cryptocurrency exchanges have increased over the past year as cryptocurrencies became more popular. The Consumer Financial Protection Bureau (CFPB) reported that of the top three crypto exchanges operating in the U.S., Coinbase received the most complaints during the past year, with concerns about domestic and international money transfers, digital wallets, and foreign currency exchange. Customers registered around 1,060 complaints against Coinbase, while complaints against companies Binance.US and Kraken stood at 184 and 34, respectively.
  • Bitcoin posted its worst second quarter (Q2) performance since 2018 as the world’s largest cryptocurrency tumbled more than 40% during the period, down more than 45% from its mid-April high of $68,863. Bitcoin’s previous two Q2 returns, for 2019 and 2020, were 157% and 42%. On average, since 2014, Bitcoin has registered a return of 33.95% and has never registered a Q2 return lower than 6%. This decline came from the wide-spread scrutiny of the environmental impact of mining the cryptocurrency and the Chinese government’s crackdown on mining operations in the country. The chart below shows that Bitcoin’s performance has lagged that of Ethereum and the Bloomberg Galaxy Crypto Index during the first half of 2021.

Bitcoin Falls Behind Ethereum and Bloomberg Crypto Index During First Half of 2021

Opportunities

  • Germany’s Fund Allocation Act, which was introduced in April 2021 and passed by the parliament, is set to come into effect this week and could theoretically prompt up to $415 billion to flow into cryptocurrencies. The act allows “Spezialfonds”, or special funds, to invest as much as 20% of their assets under management (AUM) into cryptocurrencies. Spezialfonds are one of the most dominant investment vehicles in Germany, and allocation of such size could have a positive impact on the crypto ecosystem in Europe.
  • JPMorgan reported that the upcoming launch of Ethereum 2.0 network will make staking coins for yield an attractive source of income for both institutional and retail investors, as the update shifts the blockchain from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. The report added that an estimated $9 billion is being earned by holders of staked coins on PoS blockchains, annually, and that as Ethereum transitions to PoS by next year, the annual revenue could increase to $20 billion.
  • The Bitcoin Mining Council (BMC) released a report stating that the global Bitcoin mining sector has reached an estimated 56% sustainable power mix in second quarter of 2021. This estimate was derived from just 32% of the miners on Bitcoin’s network who are currently utilizing electricity with a 67% sustainable power mix. The BMC classifies sustainable electricity as hydro, solar, wind, nuclear, geothermal, and carbon-based generation with net carbon credits, based on the principles from the International Energy Agency’s (IEA) Net Zero by 2050 report. BMC’s report comes at a time when Chinese miners are either shutting down operations or are flocking to cheap-energy hubs like Quebec in Canada and Kazakhstan.

Threats

  • Cryptocurrency trading platforms in India might have to pay an additional 18% tax even if they are not domiciled in the country. Currently, all exchanges which operate in India and are based outside the country do not pay the goods and services tax (GST), and the country’s tax authority is examining whether such levy should be applied to crypto exchanges, which the department would categorize as providing an online information database access and retrieval (OIDAR) service. Further, cryptocurrency exchanges in India have been struggling to find financial institutions that will offer services to their business as the regulatory environment around digital assets remains unclear in the country.   
  • Fitch Ratings Inc. released a report stating that stablecoins, which are digital tokens pegged to government-issued currencies like the U.S. dollar, could pose contagion risks over time. Analysts and economists have been speculating that if Tether suffers financial losses or there is a dip in consumer confidence, it could trigger a sell-off which can put downward pressure on prices of other cryptocurrencies. Fitch noted that such an event could also have implications for traditional markets, as Tether, which has total assets amounting to $62.8 billion, holds 49.6% of its assets in commercial paper (CP), which can be illiquid, and can create a wider selling pressure in the CP market.
  • Binance, the biggest cryptocurrency exchange in the world, is under scrutiny once again as Thailand’s Securities and Exchange Commission (SEC) filed a criminal complaint against the exchange for allegedly operating within the country without relevant licenses. The complaint, filed with the Economic Crime Suppression Division of the Royal Thai Police (ECD), states that Binance failed to meet a deadline for responding to an earlier warning. The SEC added that the exchange solicited Thai customers to use its services via its website or the “Binance Thai Community” page on Facebook. Binance has also received a warning over similar matters from regulators in Japan, been prohibited from operating in the U.K. and exited the Ontario market following regulatory actions against other exchanges in the Canadian province.

 

Gold Market

This week spot gold closed the week at $1,787.30, up $5.60 per ounce, or 0.33%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 0.16%. The S&P/TSX Venture Index came in up 2.10%. The U.S. Trade-Weighted Dollar rose 0.43%.

Date Event Survey Actual Prior
Jun-28 Hong Kong Exports YoY 23.6% 24.0% 24.4%
Jun-29 Germany CPI YoY 2.4% 2.3% 2.5%
Jun-29 Conf. Board Consumer Confidence 119.0 127.3 120.0
Jun-30 Eurozone CPI Core YoY 0.9% 0.9% 1.0%
Jun-30 ADP Employment Change 600k 692k 978k
Jun-30 Caixin China PMI Mfg 51.9 51.3 52.0
Jul-1 Initial Jobless Claims 388k 364K 415k
Jul-1 ISM Manufacturing 60.9 1.0%
Jul-2 Change in Nonfarm Payrolls 720k 850k 583k
Jul-2 Durable Goods Orders 2.3% 2.3% 2.3%
Jul-6 Germany ZEW Survey Expectations 75.0 79.8
Jul-6 Germany ZEW Current Situation 5.0 -9.1
Jul-8 Initial Jobless Claims 350k 364k

 

Strengths

  • The best performing precious metal for the week was palladium, up 5.67% on strong industrial demand and ongoing supply disruptions. TD Securities wrote that it expects palladium to be a positive catalyst for platinum group metals (PGMs) continuing into 2022. Sandstorm Gold Ltd. raised its production outlook following the performance of a gold stream and royalty agreement, and the purchase of a royalty package on a piece of Vale S.A.’s operations. With the addition of the royalties, Sandstorm is forecasting attributable gold equivalent production between 62,000 to 69,000 ounces in 2021. In addition, Maverix has acquired a portfolio of six royalties from Pan American Silver in exchange for 491,071 common shares of Maverix and a cash payment of $7,000,000. Royal Gold has entered a gold streaming deal on Ero Copper’s NX Gold Mine in Brazil. Royal Gold will make a $100 million payment in return for 25% of the gold produced from the NX Gold Mine until the delivery of 93,000 ounces, and 10% thereafter. Royal Gold will pay 20% of the spot gold price for each ounce delivered until the delivery of 49,000 ounces, and 40% of the spot gold price thereafter.
  • Prime Mining reported initial drill results from the Mina 20/21 area, 1.3 kilometers northeast of Guadalupe East, at its Los Reyes project. The headline result of 4.4 grams per ton silver and 1,060 grams per ton silver provides an early indication that the company may have discovered an additional underground deposit.
  • The ratio of the S&P 500 to gold is nearing a 15-year high, implying that gold is cheap. The reason why this ratio is moving adversely, is due to improving economic fundamentals. However, recent economic data points have been worse than high expectations, implying that this ratio could be close to peaking.

Weaknesses  

  • The worst performing precious metal for the week was platinum, down 1.53% despite the positive TD Securities report. Gold has been hammered by a growing list of headwinds from the Federal Reserve, signaling it is preparing to slow stimulus to rising risk appetite. Prices are set for their worst month since November 2016 after U.S. central bank officials pulled forward their forecasts for interest rate hikes. Also, the dollar is strengthening due to concerns about the delta virus strain of COVID-19 outside of the U.S.
  • Golden Star Resources Ltd. on Monday slashed its 2021 production guidance after flagging a delay in the commissioning process for the new paste fill plant at its Wassa gold mine in Ghana. The company now expects gold production in the range of 145,000 to 155,000 ounces at an all-in sustaining cost of U.S. $1,150 to U.S. $1,250 per ounce. This compares with the initial target of 165,000 ounces to 175,000 ounces at U.S. $1,000 to U.S. $1,075 per ounce.

Gold Gains With the Dollar Slipping After U.S. Jobs Report

  • Gold continues to be sold by ETFs, with the Thursday trading sessions witnessing their largest redemptions for the week. On a year-to-date basis, gold ETFs have reduced their holdings by nearly 6%. Gold bounced back to positive territory for the week with the nonfarm payrolls number adding more jobs than expected but unemployment still edged up, implying the Federal Reserve can wait longer, perhaps.

Opportunities

  • Karora Resources on Monday said it expects to nearly double its gold production over the next three years on an expansion of its Beta Hunt mine in Australia. The company plans to produce around 195,000 ounces of gold in 2024, up from its expected output of about 110,000 ounces this year. Karora said the increase will come as it raises the output of its Beta Hunt underground operations to 2 million tons annually from 0.8 million tons and expands its Higginsville mill.
  • Aya Gold & Silver Inc. said that it has been granted seven new exploration permits in Morocco. The Canadian miner said the permits were granted by the country’s Ministry of Energy, Mines and Environment, and would increase its position within its Zgounder Regional and Azegour area properties by about 40%. There are also showings of copper mineralization on the ground controlled by Aya, which need to be followed up on.
  • Silver Tiger reported high-grade assays from drilling, stepping out 900 meters south along the Sooy vein. The company is ramping up to 5 drills on the property to accelerate work on the extensive, high-grade system.

Threats

  • Gold Road reported that it expects second quarter production (100% basis, GOR 50%) to be lower at 52,000 to 55,000 ounces (a 24% drop) due to disruptions in the processing plant relating to a torn mill feed conveyor belt and failed ball mill coupling.  Additionally, maintenance costs are expected to be higher as well.  
  • The relationship of B2Gold with the Malian government could be strained. B2Gold announces the commencement of international arbitration proceedings, regarding the refusal of the Menankoto exploration permit. This comes after the denial of the expected permit renewal in March of this year, to which the company believes it is entitled to a further one-year extension under the 2012 Malian Mining Code.
  • Jake Lloyd-Smith, writing for Bloomberg, writes “gold is about to lose more of its shine.” Federal Reserve watching is likely to get more attention as we head into the next two Fed meetings in July and September. If investors start to believe the focus on tapering to be more eminent, yields could be bid up and lead to a stronger dollar.

You can read the full article at https://www.usfunds.com/investor-library/investor-alert/bitcoin-mining-uses-a-higher-mix-of-sustainable-energy-than-any-major-country-or-industry/

July 2, 2021

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors