By Kris Sayce, editor, Casey Daily Dispatch

It’s one of those classic images.

The horizon over the ocean…

The sun setting…

Perhaps a cloud, or two…

A single gull coasting in the near distance…

And an oil rig in silhouette.

There, on the rig, a metal arm sticks out high and to the side… it stretches out as far as it can. With good reason.

At the end of the arm is a flame – 50 to 100 feet high, maybe higher. An odd place for a roaring flame, you’d think.

It’s there for a reason. But maybe not for much longer…

If this is your first time reading this newsletter, welcome to the Dispatch. If you’ve been here before, welcome back.

At the Dispatch we have two goals:

  1. To introduce you to the most important investing themes of the day, and

  2. To show you how to profit from them.

We do this by showcasing ideas from our in-house investing experts: Nick Giambruno, Dave Forest, and the founder of our business, Doug Casey.

Today, we’ll look at one of the odder intersections in business. And yet, if the idea takes hold, it could mean a huge technological leap forward.

Let us explain…

Neither Price Nor Value – Just Energy

Today, we return with the topic of bitcoin. But from a different angle than we approached it last Friday.

We’re not debating its value – whether it’s a bubble or a bargain.

We won’t discuss its usefulness… or whether it’s a currency, money, asset, or just another speculation.

And we won’t examine the tech behind it or any of the other thousand or more cryptocurrencies on the market today.

The only point in the spotlight today is the energy consumption of bitcoin mining. And the innovative solution under development (that’s where we’ll come back to those oil rigs, so stick around).

Bitcoin mining is energy-intensive. But how intensive?

According to the Cambridge Centre for Alternative Finance, bitcoin mining accounts for 0.68% of the world’s energy consumption. That equates to an estimated annual consumption of 147.41 terawatt hours (TWh) per year.

In terms of total energy use, if bitcoin were a country, it would be between Malaysia (147.21 TWh) and Egypt (150.58 TWh).

(Another source, Digiconomist, estimates bitcoin mining energy consumption at only 117.61 TWh per year.)

So with that level of energy use, is there a way to either reduce bitcoin mining’s high electricity use… or a way to put less pressure on the rest of the electricity network?

It turns out there is – with those oil rigs we mentioned earlier…

“A Guaranteed Buyer of Energy”

You’ve seen the images of flames shooting out of an oil rig or oilwell site. That’s called “flaring off.” It’s the safest – and cheapest – way for oil drillers to get rid of unwanted natural gas produced as a byproduct of oil drilling.

You may wonder why they don’t use it, send it by pipeline, or ship it elsewhere for use. The simple reason is that it’s mostly uneconomical to do so. Pipelines are expensive. So are liquefaction plants, which turn gas into a liquid for easier transportation. So, they burn it off – “flare” it.

That’s a waste of a potentially useful energy source. Until now, there hasn’t been a way to do anything with it.

But bitcoin mining could be the answer…

On the newswire this week from Agence France-Presse:

As the value of bitcoin soars and concerns rise about the energy-intensive process needed to obtain it, cryptocurrency entrepreneurs in the United States believe they have found a solution in flared natural gas.

Profitably creating, or mining, bitcoin and other cryptocurrencies requires masses of computers dedicated to solving deliberately complicated equations – an endeavor that globally consumes more electricity than entire nations, but for which these start-ups say the jets of flaming gas placed next to oil wells are perfect power sources.

As an example, it’s happening right now in Texas. PR Newswire explains:

EZ Blockchain installed the first mobile data center filled with MicroBt Whatsminer crypto mining equipment at the site of a Silver Energy client in Alberta, Canada in February 2021.

As a result, the project size reached almost 1MW of power consumption, all of which is processed from 250 MCFd of stranded natural gas using a gas electric generator. The project installation took three days and the data centers were fully operational by March 2021.

It’s a subject that colleague Nick Giambruno has followed since at least December last year. That’s when he recommended his subscribers buy into a company directly involved in this new market.

As Nick wrote:

The most crucial factor that influences a Bitcoin miner’s profitability is electricity costs. Some estimates put electricity costs at over 90% of a miner’s operating costs.

Only miners with reliable access to the cheapest electricity in the world can mine Bitcoin profitably.

You can think of Bitcoin mining as the “energy buyer of last resort,” a guaranteed buyer of cheap energy.

If there is a stranded or inaccessible source of cheap energy that can’t be economically transported, Bitcoin miners will be there to provide a bid. That economic reality will help decentralize Bitcoin mining.

That’s innovation.

And that’s why Nick is so excited about the potential. In fact, Nick’s up 30% on one of his picks in the space… in just five months.

Profit From More Than Bitcoin’s Price

If these early stage projects pay off, it solves three problems associated with bitcoin mining right now:

  1. It should mean less bitcoin mining that relies on coal-powered electricity generation,

  2. It reduces the waste of “flaring” off unwanted natural gas, and

  3. At the same time, it isolates at least some bitcoin mining production away from the rest of the world’s electricity grid.

What’s not to like about all that?

Best of all, as an investor, there are ways to play this in U.S.-listed stocks. It’s a great way to get more exposure to bitcoin-related assets, while at the same time diversifying into an asset that relies on more than just the price of bitcoin going up.

It’s a play that’s well worth looking at. You can find out how to get access to this and Nick’s other research on the subject here.

Cheers,

signature

Kris Sayce
Editor, Casey Daily Dispatch