Currently, the Federal government is paying attention to the crypto and bitcoin industries. They are looking at how energy usage could be affected and if crypto mining operations could be moved into New York state.
Energy usage
Getting to the bottom of Bitcoin's energy usage has taken on more importance in the last few years, as the industry has become more prominent and the price of the virtual currency has skyrocketed. The question is, can the crypto industry become a sustainable force for the planet?
In the past year, the crypto mining industry has experienced a significant increase in energy usage, and the regulators have gone to great lengths to curb it. The DOE report, titled "Energy Efficiency Standards for Crypto Mining Equipment," recommends that the industry make greater use of energy efficient equipment. In addition, the report urges the U.S. government and Congress to adopt more energy efficient regulations for crypto mining equipment and electricity providers.
The DOE's report also recommends collecting data from electric utilities and crypto miners on their energy usage. In the report, it states that a single "block" - a transaction completed using the cryptocurrency - requires around 250 kilowatt hours of electricity. This amounts to approximately 50 days of electricity consumption in the average US household.
The "proof of work" consensus mechanism is an energy-intensive process. It involves powerful computers competing against each other to solve complicated mathematical problems.
The Bitcoin network uses around 266 terawatt hours of electricity a year. This is the equivalent of a medium-sized country. But it's not the only source of energy used by the Bitcoin network. The vast majority of the network's electricity comes from coal, natural gas and hydropower.
The Bitcoin Mining Council, a group of 51 of the world's largest mining companies, recently released a report demonstrating that energy consumption has increased by over 40%. The report also notes that the energy usage of the Bitcoin network is on track to equal the energy consumption of the United States in the year 2020.
The Bitcoin Mining Council's report also indicates that the Bitcoin network hash rate has increased by a whopping 73%. The increase has been driven by an increase in the number of miners on the network. However, it's important to note that the actual energy consumed by the network is fairly small compared to the energy used by the traditional banking industry.
New York State could be converted to bitcoin mining operations
Using upstate New York for crypto mining operations is a controversial idea, especially when environmental groups say that the activity could have a negative impact on the environment. While some are looking for ways to reduce their use of fossil fuels, environmentalists are concerned that cryptomining could cause more harm than good.
New York State has a number of shuttered power plants that could be converted to crypto mining operations. A study estimated that the state could have as many as 30 such plants. Environmentalists are concerned that the activity will cause local pollution and will threaten the state's climate change goals.
The state's Department of Environmental Conservation has denied air permit renewals to a former coal-burning plant that had been converted to natural gas. Environmental groups are also concerned that this plant will be converted to crypto mining operations. The state's Climate Leadership and Community Protection Act calls for limiting emissions by 85 percent by 2050.
The plant, known as Greenidge Generation, is located in the Finger Lakes region and produces power for the state's electric grid. The plant was purchased by Connecticut-based Atlas Holdings and began mining bitcoin in 2017. However, the plant has lost $30 million in the third quarter of the year compared to the same period last year.
Greenidge Generation converted to natural gas in 2017. However, environmental groups are worried that the plant's re-emergence could have a negative impact on the ecosystem. They have been protesting the plant for more than a year.
A recent study estimated that crypto mining operations in upstate New York would produce the same amount of emissions as a coal-burning power plant. Crypto mining operations also require a huge amount of energy. In addition, cryptomining uses specialized computers, which consume large amounts of electricity.
In April, the state's Assembly passed a bill requiring the state's Department of Environmental Conservation to perform an environmental impact assessment on cryptomining. The bill is pending in the state's Senate.
The bill will also put a two-year moratorium on issuing air permits to companies involved in crypto mining operations. It's an important step in the fight against global climate change, according to New York Governor Kathy Hochul. However, the governor has not yet indicated whether she will veto the bill.
Federal officials are paying attention to crypto
Despite the recent flurry of public-facing crypto efforts by the Biden administration, there is no clear government-wide strategy. However, some state governments have taken action. Oklahoma passed legislation that authorizes crypto-focused banks to act in a fiduciary capacity, allowing businesses to safely hold digital assets. Others are hoping to leverage crypto investment to stimulate local economies.
A recent Regulatory Intelligence report emphasized the need for regulatory certainty. It highlighted the need for cryptos to be protected from payment risks, systemic risk, and lending risks. Cryptos also must be protected from fraud and market manipulation. The report also highlighted the need for cyber resilience.
Some federal agencies are concerned about the financial stability and safety of cryptos. The Treasury Department and the Internal Revenue Service keep a close eye on crypto derivatives. They have also expressed concerns about the lack of investor protections. The Office of Foreign Assets Control (OFAC) is also examining cryptos.
President Joe Biden has not yet decided whether to issue an executive order on cryptocurrencies. His administration is still working on a comprehensive strategy for cryptos. However, the White House is preparing a directive that would guide all federal agencies on their work with digital tokens. This directive would require federal agencies to study and report on a variety of issues related to crypto.
The directive would also require the federal agencies to assess consumer protection issues and competition policy. It would also touch on crypto's impact on national security. Ultimately, cryptos are a potential catalyst for change in the financial system. However, policymakers should be careful when making public statements about crypto's benefits. Rather than overstating the impact of crypto on financial inclusion, policymakers should focus on the risks involved.
The 117th Congress introduced 35 bills focused on cryptocurrencies and blockchain policy in 2021. Senator Maggie Hassan is also introducing a bill to study ransomware. Congressman Tom Emmer is co-chair of the Congressional Blockchain Caucus. In addition to the White House initiative, several state governments have proposed laws regarding crypto. In Colorado, a bipartisan bill exempted cryptocurrencies from securities laws.
As the Biden administration weighs the pros and cons of a government-wide approach to cryptocurrencies, there are many concerns. There are also several powerful players in the nascent industry who argue against increased regulation. They say that crypto products fill a void left by traditional financial institutions.
Price volatility
Traders and investors are increasingly optimistic about the future of Bitcoin. They believe that the asset will retain its value if more people use it.
However, the price volatility in bitcoin news remains a concern. This is especially true in the short term. The asset has remained roughly the same for most of September. The price is now above its panic selling lows, but it has yet to break above the $16,000 level.
The reason for this is that investors are not sure about how long the asset will retain its value. It is a young asset that has only recently begun to be fully understood. Its value is also influenced by news and regulation.
For example, El Salvador made its cryptocurrency legal tender in early September. This sparked investor concerns about the nation's economy. The country's currency weakened. This led to a drop in bitcoin prices. It was also the case with Litecoin. In response to a fake Walmart press release, Litecoin also weakened.
Another factor influencing the price volatility in bitcoin news is the lack of liquidity. Large trading firms have not entered the crypto market yet. This means that price swings are exaggerated. It also means that there is less reaction to sensitive economic data.
Traders and investors are speculating that a rate hike by the Federal Reserve could lead to renewed volatility in the crypto market. The United Nations has also called on the Fed to stop raising rates.
The price volatility in bitcoin news is not as extreme as it was a year ago, but the volatility remains. The asset is still mainly used by investors to profit from price swings. However, the value of the asset will increase when more people use it.
Price volatility in bitcoin news is likely to continue. It is also important to remember that the value of a cryptocurrency depends on the perception of its value. It can also be influenced by security concerns.
If you want to keep up with the latest price volatility in bitcoin news, check out the Crypto Volatility Index. It tracks the volatility for Ether and Bitcoin.