As Texas is hit hard by a severe winter storm, bringing snow and freezing temperatures, Bitcoin mining farms go offline as the currency's value reaches an all-time high. Bitcoin achieved a record high this week at a value of $54,000 on Wednesday, with reports of the currency 'going mainstream'. While big companies such as Tesla and some major investment banks, including JPMorgan and Goldman Sachs, are coming around to the currency's appeal, its volatility threatens the sustainability of this value.
However, just as Bitcoin gained its biggest achievement to date, power outages in a major mining hub meant many mines went offline, causing concern around the currency's stability.
The storm which spread across parts of Texas, including Houston, from Monday night, led to power outages as the state's power grid went down. The severe weather has also affected power in Kentucky, causing mining farms to go offline beyond Texas.
Some companies have experienced a hashrate decrease of as much as 40 percent due to the outages. As mines go offline, this doesn't just affect Texas, as the state is home to some of the largest Bitcoin mining companies in the world, including Bitmain and Layer 1.
Texas has been popular for bitcoin mining due to its low electricity prices. However, challenges, such as the power outages faced this week, are not uncommon. Storms in previous years as well as this January have led to various power cuts across the state, with little preparation in place to manage these outages.
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Aging infrastructure across Texas is largely to blame for the grid failure as wind turbines froze, and nuclear plants, coal plants and thermal generators were all hit by the storm bringing energy production to a standstill.
As much as 30 gigawatts worth of energy is thought to be offline, around 26 gigawatts of thermal energy and the rest from wind sources.
Nevertheless, it's not bad news for all Bitcoin companies. Some bitcoin miners have been able to sell unused energy back to the grid, with the increase in demand meaning a high profit margin.
These outages come just a week after Argo Blockchain (ARB) announced plans to acquire 320 acres of Texan land to build a 200-megawatt data center in 2021, at a cost of $17.5 million. Despite the threat of yearly storms, companies are still betting big on Texas for Bitcoin mining.
While the value of Bitcoin decreased significantly in i2018, after the initial hype around the world-famous cryptocurrency, it increased fourfold in 2020. This achievement is largely in response to big companies, such as Tesla, Square and MicroStrategy, starting to invest in digital currencies.
Just last week, Tesla announced that it has transferred $1.5 billion of treasury reserves into Bitcoin as a risk diversification measure. Similarly, Microstrategy has increased its debt offering to over $1 billion in order to purchase more Bitcoin. The company already holds 71,000 bitcoin and is betting even bigger on the digital currency following Wednesday's price surge.
So, as miners across digital currency hub Texas face difficulties in keeping online, this does not seem to deter big firms and mainstream investors from betting big on Bitcoin. Reaching an all-time-high value and gaining greater investment from several big players suggests the cryptocurrency could flourish even further in 2021.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More