The Tide Has Turned

After China banned crypto mining last year, miners cropped up in dozens of other countries – and some even went to Texas. Soon, the Lone Star state became the world’s newest bitcoin mining capital. Governor Greg Abbott even made the issue a priority in his re-election campaign. 

However, concerns have been raised about how crypto mining will affect Texans’ electricity bills in recent months.

A recent Bloomberg article says that a vote will be held by the Electric Reliability Council of Texas (the Texas grid operator) on creating a task force to examine how many mining operations are connected to Texas’ electric grid and how fast they are operating. 

There’s no doubt that whenever a region becomes a crypto mining hub, it influences local electricity consumption and, consequently causes price increases. Besides adding extra pressure to the grid, crypto mining also requires system upgrades. The Electric Reliability Council of Texas is trying to evaluate how crypto mining will influence the electricity supply.

It might be too soon to predict an immediate impact, but the past experiences of other states give a hint as to what Texas might experience in the future. A study claims that bitcoin mining increased upstate New York’s energy costs by $165 million for homeowners and businesses $79 million in 2021. That means mining can drive up monthly electric bills by about $8 for individuals and $12 for businesses. That’s why Plattsburgh, New York, temporarily banned crypto mining when electricity bills skyrocketed in 2018. For a state like Texas, these numbers are alarming.

That’s because there are three power grids in the United States: one on the Eastern seaboard, the Western seaboard, and one in Texas. That might lead the layperson to believe that Texas is power independent – thanks to its swath of natural gas and oil fields in the state – however, that’s not exactly true. A pretty high-profile failure in Texas’s power grid proved that the state’s systems might be ill-prepared for severe weather events. Now, consider that there are even more crypto miners hooked up the grid than there ever have been.

Since Texas lacks regulation and has low-cost electricity, it has established itself as a crypto hub. However, the long-term viability of the state’s support for cryptocurrency mining might be greatly affected by the outcome of the report or a change in public sentiment (namely, the fact it raises costs) which makes it unpalatable to Texans.

Ethereum’s long-awaited update, Eth2, is on the horizon – and recent tests indicate that users can expect it as early as this summer.

However, while the masses have been waiting for Eth2, Ethereum has received some other updates to “hand hold” the network to its destination. One of those updates has helped the network burn over 2 million Ether. 

As reported by Watch the Burn, a dashboard that monitors token burn mechanisms, the network has destroyed over 2,000,996 $ETH.X, which is equal to $5.82 billion. 

Token burns involve permanently removing tokens from circulation. The goal is to decrease the number of tokens available, thereby theoretically increasing the price of the token. In Ethereum’s case, the network burns a portion of the fees that previously went to miners – effectively removing it from circulation. This change was proposed in EIP-1559, which was added to the network in the London hard fork in August 2021.

These changes will have a longer-lasting effect on the Ethereum blockchain once Eth2 launches. That’s because the network will likely become deflationary after its pivot off its proof-of-work (PoW) consensus mechanism. By adopting the new, more environmentally friendly proof-of-stake (PoS) mechanism, Ethereum should also see a reduction in transaction fees and greater scalability.

According to news reports, Ethereum’s network will be upgraded in Q2 2022. At the time of writing, $ETH.X was trading around $2,900, a 15% increase from the previous week.

If you want to know more about Eth2, read our previous newsletter here. You can also read the difference between PoW and PoS here. 

Several cryptocurrencies are benefitting from the upward trend of the market. Here are three that we singled out.

1. Algorand: Algorand, a proof-of-stake blockchain cryptocurrency protocol, recently announced it added more than 6 million new accounts this year. One of the reasons for the massive adoption of the Algorand blockchain network is its technical upgrade. This makes Algorand-based decentralized applications (Dapps) run efficiently on various low-power devices like smartphones. Algorand is known for transaction speed. The upgrade is just an example of how it will help developers to connect with each other automatically. In response to the news, $ALGO.X surged 8% in the past 24 hours, reaching $0.79.

2. EOS: The EOS community finally has something to look forward to after a year of ups and downs. The blockchain network, which enables decentralized applications (Dapps), gained some attention when crypto exchange crypto.com announced it would allow deposits and withdrawals of $EOS.X via Cronos ($CRO.X). Cronos is a native token of crypto.com.  As a result, $EOS.X saw over a 12% jump, trading at $2.43. The token is currently ranked 51 on the list of cryptocurrencies by market capitalization.

3. Dash: Dash, an open-source blockchain network, aims to solve scalability issues related to Bitcoin. Venezuela’s national cryptocurrency, Petro, is built on the Dash blockchain, which is why $DASH.X is popular there. Recently, the South American country announced it would raise the minimum wage to the equivalent of $30 from its previous level of around $2. It would be done by pegging the monthly minimum wage to the Petro (PTR) cryptocurrency. Since Petro is built on top of the DASH blockchain, $DASH.X gained attention today. Token prices have risen over 27% in the past seven days, trading at $122.

Goldman Sachs has become the first major U.S. bank to make an over-the-counter (OTC) cryptocurrency transaction. The bank traded a bitcoin-linked instrument called a non-deliverable option with crypto merchant bank Galaxy Digital. Here, the non-deliverable option means Goldman Sachs bought a contract that bet on the future price of Bitcoin rather than purchasing the digital asset itself.

Galaxy Digital, an investment firm specializing in cryptocurrencies, has partnered with Goldman Sachs as a liquidity provider for the investment bank’s Bitcoin futures trading desk.

“This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients,” said Galaxy co-President Damien Vanderwilt.

Following years of skepticism, it is interesting to see how Goldman Sachs makes back-to-back announcements about crypto. A move such as this could be considered an important milestone in the advancement of cryptocurrency markets.