Tesla billionaire Elon Musk has rocked the bitcoin community in recent months; first by jumping headfirst into crypto at the beginning of the year and then suspending Tesla’s support of bitcoin payments.
The bitcoin price has yo-yoed as a result of Musk’s flip-flopping, now down around 50% from its April highs. Musk pulled the plug on Tesla’s bitcoin payments due to bitcoin’s eye-watering carbon footprint but said the electric car company will continue to hold the $1.5 billion worth of bitcoin it bought in late January, vowing to help fix bitcoin’s sky-high energy demands—but so far failing to pull Tesla’s bitcoin investment out of the red.
Now, Pennsylvania-based Stronghold Digital Mining, a bitcoin and cryptocurrency miner that uses waste coal to power the machines that secure the bitcoin network and validate transactions in return for freshly-minted bitcoin tokens, has raised $105 million from investors to build out its operation.
“We’re the reverse of most crypto companies,” says Bill Spence, 40-year energy industry veteran and Stronghold co-chairman, speaking over the phone. “In order to be economically viable, we sought out crypto, not the other way around.”
Stronghold, classified by the Commonwealth of Pennsylvania as a Tier II alternative energy source, equivalent to a large-scale hydropower plant, uses the energy generated by cleaning up vast piles of bituminous waste coal that is devastating local ecosystems and has been “wreaking havoc” in Pennsylvania “for the last hundred years” to mine bitcoin and digital assets.
“About five years ago, I realized we’d go out of business if I didn’t find an artificial market for this power and I stumbled on crypto,” says Spence. “Without crypto and bitcoin we wouldn’t be able to do what we’re doing.” Stronghold expects to have 30,000 cryptocurrency miners operating by year-end and is currently in negotiations to acquire additional facilities with over 200 megawatts of power capacity.
The bitcoin price has been hit over recent weeks by China’s latest bitcoin and crypto crackdown, which, along with Elon Musk’s concerns over bitcoin’s energy use, has wiped over $1 trillion from the combined cryptocurrency market.
“The bitcoin price could fall as low as $3,000 before we’re not profitable,” says Spence. “Volatility doesn’t make us nervous.”
Until recently, China is thought to have contributed over 50% to bitcoin’s mining capacity, however, authorities in the country have begun ordering bitcoin and cryptocurrency miners to shut down their operations, according to reports. According to state-backed newspaper The Global Times, 90% of bitcoin mines in China’s Sichuan province have been shuttered in recent days, sending the bitcoin price sharply lower.
“I feel like [the China crypto crackdown] is beneficial for the industry,” says Spence. “These miners moving out of there, there’re going to be forced to become greener.”
The U.S. has emerged as one of the primary destinations for bitcoin miners fleeing China. Last week, Miami mayor Francis Suarez has said he’s working to lower the cost of electricity in order to entice bitcoin miners to make the move to Florida.
“We want to make sure that our city has an opportunity to compete,” Suarez told CNBC last week. “We’re talking to a lot of companies and just telling them, ‘Hey, we want you to be here.'”
Estimates for what percentage of renewable or “green” energy is currently powering the bitcoin network are inconsistent. A recent report estimated renewably generated electricity made up almost 40% of the energy consumed by the bitcoin network, however, a previous study put the figure at just over 70%, largely due to the abundance of hydroelectric generators in Southwest China and Scandinavia—both major bitcoin mining hubs.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Musk announced in May, sending shockwaves through bitcoin and cryptocurrency markets. Last week, influential U.S. senator Elizabeth Warren called for a “crackdown on environmentally wasteful cryptocurrencies” to “fight the climate crisis.”
Musk has said he will restore Tesla’s bitcoin support if or when bitcoin’s carbon footprint improves, however, he hasn’t said what threshold it needs to cross or how it will be measured.
“I love what Elon Musk said,” says Spence. “I believe in bitcoin and crypto and I believe we need to make it better. Blockchain is going to change the world and crypto is the lead sled dog for that technology.”
Stronghold’s Scrubgrass power plant removes around 90% of NOx emissions, 99.9% of particulate emissions, 99.9% of mercury emissions, and can remove 98% of SO2 emissions from the waste coal. Additionally, the fly ash produced by Stronghold is classified as fertilizer and has been awarded an agriculture liming materials license by the Commonwealth of Pennsylvania’s Department of Agriculture.
“A negative impact on the environment has long been a criticism of bitcoin mining, with good reason,” Greg Beard, Stronghold chief executive and co-chairman, said in a statement alongside the fundraising announcement. “Our ownership of the Scrubgrass plant combined with the environmental benefits which accrue to the region allow us to mine bitcoin at what we believe to be some of the lowest costs in the industry while making a transformational contribution to the environment.”