Energy independence has rarely looked so good. Just ask Germany, who started abandoning nuclear energy after the Fukushima meltdown and increased its reliance on Russian natural gas. Now, the EU finds itself contributing nearly 100 billion euros a year to the most hated regime in the world today.
As for the rest of us, fuel prices have now reached all-time highs – putting the squeeze on pretty much every household and industry worldwide.
But for crypto miners, relying on traditional energy sources has been a losing game even longer. The sheer amount of power they need has led to clashes with every government from Kazakhstan to Plattsburgh, New York.
Now, investors should be aware: Two of today’s best crypto-mining plays fall into the clean-energy category – and new legislation in New York may give miners yet another push in that direction. Could Texas be next? Let’s dig into the news…and the key takeaways for crypto investors.
Are New York and Texas About to Crack Down on Crypto Miners?
Forty-eight members of the New York State Assembly have signed on as co-sponsors to a bill that “establishes a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods” – most notably, Bitcoin (BTC-USD).
Since the first crypto boom in 2017, cheap hydroelectric power has made New York particularly attractive to miners. Cities that get their power from the Niagara River charge next to nothing for electricity. In Plattsburgh, you pay as little as 1.9 cents per kilowatt hour – “a fraction of the nationwide average cost of 13 cents per kilowatt hour,” CoinDesk notes.
Plattsburgh’s government was the first to place a moratorium on mining, back in 2018. For nearly a year, mining completely ceased while the city government enacted noise limits, heat regulations, and a tariff structure in which miners – not residents – would foot the bill for all the extra power being used in town.
The year before, crypto miners using the local grid had “pushed the city to the brink of its power quota, forcing the municipal power authority to buy expensive power on the spot market to keep the lights on,” CoinDesk explains.
Now, if the statewide ban passes, New York would issue a three-year moratorium – but one that specifically targets miners “located on sites of former power plants that used any form of fossil fuels,” reports The Ithaca Times. State legislators much more focused on the environmental impact to upstate New York residents and tourism.
Meanwhile, in Texas… The Electric Reliability Council of Texas (ERCOT) is worried about becoming the next Plattsburgh.
In last year’s winter storms, we learned that ERCOT is none too prepared for extreme weather conditions. Now the Texas power authority is taking a more cautious attitude to crypto mining on the grid.
ERCOT “members will vote this month on creating a task force to understand how many mines will connect to the grid and how fast,” Bloomberg reported last week.
Texas has certainly not been unfriendly to crypto. Governor Greg Abbott has actively encouraged it, and so has the mayor of Austin, Steve Adler. But if Texans hear of any further disruptions to ERCOT – and rising prices – due to crypto mining…that could change real fast!
No Wonder Crypto Miners are Going Green
Add it all up, and this industry has perhaps the biggest incentive to shift to renewables. Sure enough, the average member of the Bitcoin Mining Council has reached 66.1% sustainable energy, as of last quarter.
Aside from regulatory troubles, “it simply makes sense from a business perspective,” writes Zach Bradford, CEO of CleanSpark (NASDAQ:CLSK), in an op/ed for CoinDesk yesterday. “Bitcoin miners will want the cheapest sources of energy available. And as clean energy gradually gets cheaper, mining operations will help subsidize green projects.”
CleanSpark started as an environmental, social, and governance (ESG) company, with software that helps manage solar panels, communicate with the grid, etc. However, incorporating bitcoin mining in these installations gives them a lot more economic value, as this German study found last year.
Today, bitcoin mining makes up nearly 90% of CleanSpark’s business, and the shift has dramatically boosted CLSK’s revenues and margins in just one year.
What’s the Opportunity for Investors?
For the bottom line on any “crypto stock,” consider running the ticker through Portfolio Grader, our stock grading system developed by investing legend Louis Navellier. It’s free, easy to use, and it’s been a reliable source of great stock ideas in this tricky market.
Plug CLSK and other top mining stocks into Portfolio Grader, and here’s what you’ll get:
Unfortunately, CleanSpark, along with Riot Blockchain (NASDAQ:RIOT), gets a “Sell” rating at this time. Below we see CLSK’s full Report Card:
CleanSpark has a history of strong Sales Growth and positive Earnings Surprises… But Wall Street analysts have been revising their estimates lower, and this crypto miner gets a D grade for Cash Flow. That’s no good when “cash flow” is the majority of your business.
The biggest problem for many crypto miners – and other growth stocks – is that they are simply out of favor on Wall Street. And the lack of institutional buying pressure contributes to a Quantitative Grade of D for CLSK and several other mining stocks.
On the fundamental side, though, HIVE’s earnings scores have largely improved since my last article!
HIVE gets an A for Earnings Growth and Earnings Momentum, as well as Sales Growth and Return on Equity, and its Cash Flow is strong as well.
Notably, HIVE is also one of the crypto miners most focused on renewables. In fact, the company says it has been “since day one,” using “100% green energy to mine both Bitcoin and Ethereum.”
And TeraWulf earns the strongest overall grade of all these crypto miners at this time. Here’s the full Report Card for WULF stock:
Sales Growth and Cash Flow are particularly bright spots for TeraWulf. It’s also the only one of these crypto miners to earn a B for its Quantitative Grade – which is the biggest single factor in Portfolio Grader’s overall scores.
In the end, while Riot Blockchain and Marathon Digital (NASDAQ:MARA) tend to get the most attention… It could well be that the lesser known – and more clean-energy-focused – crypto miners like HIVE and WULF provide the best opportunity now!
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.
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