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Texas is capitalizing on Chinaās early 2022 crypto mining ban with fervor. The state counts dozens of companies operating mines in its borders ā and more on the way. Last week, Riot Blockchain Ā (NASDAQ:RIOT) announced it would be moving from New York to Texas. Even local government is getting in on the action; Fort Worth recently became the first U.S. city to mine its own Bitcoin (BTC-USD).
Abbott says that welcoming the crypto mining industry will ultimately be good for the state. He even goes as far as to say that the growing number of miners will help āshore upā the Texas electrical grid, which has seen a lot of stress in recent years.
But is Abbott right? Could Texas be saved by welcoming an industry to use its land and hook up to its grid? There are far more reasons to be skeptical than optimistic.
Investors in crypto mining stocks should be concerned for their investments. This is not just because the industry is tanking right now. Rather, there are many factors that make the migration to Texas a bad idea ā most notably, the effects of global warming and the unreliable infrastructure of the state.
Infrastructure-wise, Texas is a mess. Abbottās claims that the industry will help fix it are also disingenuous. Thereās no reason to believe bringing crypto miners to Texas will stabilize the electrical grid. If anything, they may do more damage. After all, the amount of power miners use is well-documented. Estimates predict that in just a year, Texas crypto mining will require six gigawatts of energy. Thatās equivalent to Houston, the fourth-largest city in the United States.
Additionally, although these companies claim to be green by accelerating solar development in the state, thereās evidence that the swells of energy their solar farms produce will be detrimental to Texasā weak electrical infrastructure. Essentially, ācapacity bottlenecksā and too few power lines limit the transportation of solar energy to the metro areas that need it. Too much energy could lead to a grid collapse.
Abbott and other crypto bulls are correct when they say crypto mining is helping boost solar energy infrastructure in the state. But the problem is none of that energy is actually making it to people in a meaningful capacity.
The fact Texasā energy grid may be incapable of moving mass solar energy to metro areas is one major drawback to the solar production catalyzed by crypto miners moving to the state. Because of a lack of wires able to run this energy, Texas will be sitting on unusable masses of energy whenever thereās a blackout.
In the last two years, blackouts have occurred many times to the great detriment of Texans. Back in February 2021, one blackout led to hundreds of deaths and billions in property damage. In May 2022, six power plants also randomly shut down, cutting people off from 2,900 megawatts of energy.
This week, the future of crypto mining stocks in Texas is being called into question due to an incoming heatwave. Many miners are already shutting down operations in anticipation of sweltering temperatures; the Electric Reliability Council of Texas (ERCOT) is expecting the heatwave to cause state-wide outages again.
This could very well be a peak into the future for Texas-based crypto mining companies. Any time extreme weather is coming, they will have to halt operations to keep the grid stable. Moreover, unexpected weather events could halt operations without a momentās notice, like last yearās flash-freeze.
Extreme weather is becoming commonplace in Texas, thanks to rising temperatures around the globe. Daily temperatures in the state are demonstrably climbing. This past June was the stateās hottest on record. With heatwaves likely to become more frequent, Texas-based crypto mining companies are swimming in doubt.
On the date of publication, Brenden Rearick Ā did not hold (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 Ā Publishing Guidelines.
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