There is a lot of speculation behind the exact reasons for the recent cryptocurrency sell-off. Whether or not digital currency prices are in a bubble is debated. But whether you are a fan of Bitcoin (CRYPTO: BTC) or consider it a worthless mirage, it is undeniable that its exploitation has a significant negative impact on the environment.
According to the Cambridge Center for Alternative Finance, Bitcoin’s estimated annual energy consumption is 116 terawatt hours. This is as much electricity as countries like Argentina or the Netherlands consume in a year.
Bitcoin’s environmental impact has been a topic of conversation for years, but it has gained more attention lately. One of the reasons is that famous names have taken notice. When Elon Musk announced that You’re here would no longer take Bitcoin as a payment method due to environmental concerns, the price of tokens has plummeted. Another problem is that the total energy consumption for Bitcoin mining tends to increase with its price, as more and more operators bring computers online to compete with mining for new offers.
Last year’s “halving” further increased the cost of energy, which halved the number of Bitcoin miners received to solve each block of complex calculations to add transactions to the blockchain. Yet despite Bitcoin’s recent plunge of over 40% from its all-time high, the price of the cryptocurrency is still up around 27% for the year, which is a better performance than the gain of nearly 12%. S&P 500 a book.
Whatever the next step in the cryptocurrency market, the environmental cost of mining Bitcoin is not a topic that will go away anytime soon. And for investors looking to capitalize on these concerns, NextEra Energy (NYSE: NEE) and Western digital (NASDAQ: WDC) are two stocks that could be big winners as crypto mining looks to be turning green.
It’s no secret that about two-thirds of all Bitcoin mining takes place in China, while only 5-10% of all Bitcoin is mined in the United States. minor at the expense of higher emissions. One way to reduce Bitcoin emissions is to power more platforms with electricity produced from renewable energy. It sounds bizarre, but Bitcoin mining could be a cost-effective solution to the energy storage problem of renewables. It is well known that renewable energy production is now competitive with fossil fuels. But batteries are still too inefficient to store wind or solar power on a large scale. Instead of storing excess electricity, power companies could use it to mine Bitcoin. As the renewable capacity of the United States increases, we could see a greater percentage of Bitcoin extracted from cleaner forms of energy.
Whether the increase in demand for renewable energy is coming from crypto miners looking for alternatives to fossil fuels to power their huge IT complexes, or whether it’s driven by President Biden’s new infrastructure bill (or both), NextEra Energy is poised to thrive.
Like most utilities, NextEra seeks to integrate renewables into its predominantly fossil fuel based portfolio. The difference is that while many of its competitors are still at a relatively early stage in their investments in renewable energy sources, NextEra has already built and contracted several gigawatts (GW) of capacity. Its renewable division, NextEra Energy Resources (NEER), secured 92% of its capacity under long-term contracts in 2020. These contracts provide predictable revenue streams, which helps predict and justify further projects. growth.
NextEra plans to add between 23 GW and 30 GW of renewable capacity between 2021 and 2024. At the high end, this would place NEER’s total renewable capacity above 50 GW. For context, consider that the United States had 1,117 GW of utility-scale power generation capacity in 2020, and that includes both renewable and non-renewable sources. The expected contribution of the company to the network as a whole is remarkable.
NextEra’s high-octane growth spurt has come at a cost to its bottom line and bottom line in recent years. However, the company expects its adjusted earnings per share to increase by 6% to 8% per year from 2022. NextEra is also a Dividend Aristocrat with a return of 2.1% based on the stock price at the time. of the writing of this article.
My second pick is a lot more motley than a utility stock like NextEra. Enter Western Digital, which has been making computer hard drives for decades. A pandemic-induced wave in the video game industry has directly helped the company’s WD Black product line, which provides storage solutions for PC and console games. Last week, it released three new SSDs for the WD Black portfolio specially designed for new consoles like the PlayStation 5 and Xbox One, as well as its latest PC offering. So what does all of this have to do with crypto?
There has been a big buzz around green alternatives to Bitcoin. Most of these alternatives use what’s called a ‘proof of space’ model as opposed to Bitcoin’s ‘proof of work’ model. Bitcoin miners depend on high performance graphics processing units like those manufactured by NVIDIA to extract new supplies and verify transactions on the blockchain. Proof of space tokens use storage as a means of verification. In other words, Bitcoin relies on the computing power used, while the proof of space tokens rely on the memory provided by hard drives.
Chia is one of the hottest evidence of space alternatives to Bitcoin. same Amazon opens its AWS platform to exploit the Chia. Chia mining still consumes a lot of energy, but the idea is that the model is much less demanding in terms of power consumption than Bitcoin because it was specifically designed to reduce emissions over time.
The young cryptocurrency has scheduled halving events similar to Bitcoin’s. Bitcoin halving events happen about once every four years. While Chia does not have a fixed supply limit like Bitcoin, its founders designed a system that will gradually increase supply at a low and predictable rate.
Established businesses with a new advantage
Utilities like NextEra Energy are some of the more obvious choices for investors looking for ways to profit from the future growth of clean energy, as well as the push towards sustainable cryptocurrency mining. And Western Digital is an established company that could benefit from growing concerns about the high environmental cost of Bitcoin. Chia is the leader among evidence for space tokens, but more do exist, and more could be developed. For Western Digital, it’s the same. Whether its demand is from crypto players or miners, the tech company appears to be in an excellent position to benefit from a variety of tailwinds.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.