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Sam Bankman-Fried Trial

Crypto mining hits a (very) rough patch

Lily Jamali Jan 13, 2023
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Above, fans cool servers at a bitcoin mining facility in New York. Surges in energy prices have boosted the costs associated with bictoin mining. Geoff Robins/AFP via Getty Images
Sam Bankman-Fried Trial

Crypto mining hits a (very) rough patch

Lily Jamali Jan 13, 2023
Heard on:
Above, fans cool servers at a bitcoin mining facility in New York. Surges in energy prices have boosted the costs associated with bictoin mining. Geoff Robins/AFP via Getty Images
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In late 2021, the price of a bitcoin topped $65,000. Since then, the price has fallen 70% and taken with it the fortunes of the once-burgeoning crypto mining industry.

Those operations are involved in generating bitcoin and other cryptocurrencies, often using sprawling stacks of computers that require a ton of electricity to stay running.

Some states and municipalities have been vying to attract this industry for years. Others have been less welcoming, with critics charging that they are hurting clean energy goals across the country and around the world.

The crypto contingent at this month’s CES in Las Vegas seemed eager to show it’s not fazed by the current moment.

Speakers on a panel called “How to Stay Warm in a Crypto Winter” were introduced this way: “These are not individuals who jumped in over the last two years during all of the craziness.”

In other words: No crypto tourists here “but really the crypto OGs.”

This crypto winter started early last year, months before the November collapse of FTX and the arrest of founder Sam Bankman-Fried.

From the CES convention floor, Sheila Warren, CEO of the industry group Crypto Council for Innovation, acknowledged those events haven’t helped public perception.

Still, “the thing I’m certainly seeing here at CES is that this isn’t going away,” she said. “It is definitely here to stay.”

But the industry is certainly in trouble. That’s especially true for the businesses that make their money mining cryptocurrencies. Across North America, shares in many of those firms have crashed, falling 90% or more over the last year.

“The biggest thing is probably just the bitcoin price in general. It’s fundamentally a different business when your revenue is cut by 70%,” said Ben Gagnon, chief mining officer at Canadian mining operation Bitfarms.

Meanwhile, the cost of a key input shot up as the global energy crisis set in, said Ben Harper of Luxor Technologies, which provides software services to the industry.

“You have this huge increase in power prices that’s happened over the last year, and that’s squeezed margins from the cost side,” Harper said.

Back when times were good, crypto mining farms were plowing cash into more mining computers. Stacks of them were set to be installed at the sprawling and very loud facility that Marketplace visited in Massena, New York, a year ago.

More machines are chasing the same prize these days, added Luxor’s Harper. “The more mining on the number of fixed coins, obviously, the less revenue there is for any miner,” he said.

Their collective crash has been welcomed by environmental groups organizing against energy-intensive crypto mining.

In upstate New York, the group Seneca Lake Guardian helped push for the nation’s first statewide partial moratorium on new crypto mining, arguing those projects are at odds with New York’s carbon reduction goals.

A sign hangs on the fence outside the Blockfusion facility in Niagara Falls, New York on October 24, 2022.
A bitcoin mining facility is seen in Niagara Falls, New York in October 2022. The state passed a partial moratorium on new crypto mining late last year. (Geoff Robins/AFP via Getty Images)

Yvonne Taylor said crypto’s travails have helped her group gain traction in their local fight against a crypto miner operating at a fossil-fuel power plant in their community.

“It’s pretty validating, because we’ve been raising the alarm and shouting our concerns at the top of our lungs for literally years about this facility,” Taylor said.

North of the border, two Canadian provinces — Manitoba and Quebec — are using different tactics to limit crypto mining.

And even though there are still some green pastures for miners, including states that offer subsidies to them, crypto investor Bradley Tusk of Tusk Ventures warns the industry needs a wake-up call.

“They need to get much more politically sophisticated. If they don’t start to be smarter, more proactive, and more aggressive, they’re going to be completely banned from doing what they do entirely,” Tusk said.

Tusk added that’s true for crypto miners — and the crypto industry as a whole. “If you don’t step up, you’re gonna get wiped out.”

Although there’s new legislation to crack down on crypto mining nationally, for opponents like Thomas Cmar, a senior attorney at Earthjustice, the effort against the industry has largely been a state-by-state fight.

“They’re chasing electricity prices,” Cmar said. “They’re looking to use large volumes of electricity — regardless of where it comes from — at a very critical time for our country’s policies on climate.”

Even after a rough year, there’s still plenty of crypto mining activity, Cmar said. And if the crypto miners lose in one state or province, many are prepared to pack up and move to another.


An abridged version of the above story appeared on a Jan. 19 episode of “Marketplace Morning Report.” You can listen to the condensed audio version below.

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