Their boundless optimism never wavers, however.
Cryptocurrency miners began flocking to Texas in the past five years, drawn by the state’s low energy costs and relaxed regulations. As they began setting up shop, lawmakers and local officials were touting the boom as an economic lifeline for the state’s struggling rural communities where many landed.
Nearly 30 crypto mines set up shop in Texas, big data centers that consume tremendous amounts of energy to run banks of computers humming away to mine new bitcoins.
But now, many — if not most — are struggling to stay afloat amid the plummeting value of the commodity they create and soaring electricity costs.
“Bitcoin miners are operating under the very slimmest of margins right now,” said Lee Bratcher — president of the nonprofit Texas Blockchain Council. “There are not many bitcoin miners that are making profits similar to what we would have seen. The bitcoin mining industry, as a whole, is tightening the belt.”
That’s a big turnaround from 2021, when bitcoin’s value peaked at $68,000 and miners collectively earned more than $60 million a day, according to data from Blockchain.com. By the end of 2022, the value had plummeted to less than $17,000 — and miners’ take was $10 million a day. As a result, mining companies that borrowed millions to set up during the bull run now are facing uncertain futures. Several have gone bankrupt. Others are trying to sell off assets. Some have started returning equipment to bankers who financed it.
Shares in Riot Platforms Inc., which operates the state’s largest bitcoin mine northeast of Austin, are down about 60 percent from this time last year. They closed Thursday at $6.13.
Still, many in the crypto mining industry and those who support it remain optimistic it can weather the downturn, saying that it provides a side benefit for Texas as a means of managing the state’s electrical grid, which can also be an occasional source of substantial revenue for the mining companies.
[Bratcher] estimated that bitcoin mining created about 2,000 direct and 20,000 indirect jobs statewide.
“It’s still contributing to the Texas economy at a pretty significant clip,” he said. “The miners are still following through on their aspirations to be good citizens and good corporate citizens.”
Opponents, though, have decried crypto miners as profiteering on the state’s electrical grid while generating a dubious product.
Ed Hirs, an energy fellow and economics lecturer at the University of Houston, said crypto enables bad actors to avoid local and state taxes and hide activities when engaging in criminal activities. And bitcoin miners, he said, have been striking moneymaking deals with the state’s struggling power grid to buy energy at low rates to make bitcoins.
“They remind me of used car salesmen,” he said during a recent interview.
Murtuza Jadliwala, an associate professor who taught an undergraduate class on cryptocurrency at the University of Texas at San Antonio, said he supports research into the “groundbreaking” blockchain technology — a digital ledger that enables bitcoin by recording the history of transactions. But he’s not a fan of bitcoin itself.
“Do we need cryptocurrencies in our life? I don’t think so,” he said. “There are already good forms of currencies that humans have gotten used to.”
As part of his academic research, Jadiwala has interviewed state comptrollers around the nation to assess economic arguments for bitcoin mining.
“From the states’ perspective, I presume bitcoin mining can be profitable as a business,” he said. “In Texas, we already have pollution and a climate crisis, and on top of it you’re creating this additional pressure on a delicate energy ecosystem. Is it worth it? It might have been worth it if it’s basically doing something good for humanity. I personally don’t see that.”
The Texas cryptominers’ problems mirror those elsewhere, which I hope isn’t too much of a surprise to anyone. But the fall of FTX a few months ago, which is one cause of the current woes but by no means all of them, didn’t dampen anyone’s enthusiasm, so there’s no reason to believe that the “we just have to ride this out” mentality is going anywhere. Much of the growth of cryptomining in Texas has been in rural areas, and I continue to wonder what will happen if the gravy train derails. Maybe if things slow down that will answer some of the questions about electricity use that have been raised. Until then, I’m just going to keep an eye on this. I remain highly skeptical but oddly fascinated by the whole thing.