Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I heart podcast
Speaker 1: and I'm Stacy Marie Ishmael, managing editor of Crypto for
Speaker 1: Bloomberg News. It's Tuesday September. Sweden and Norway are home
Speaker 1: to some of the most abundant energy sources in the world,
Speaker 1: including Jew thermal, wind and Hydro Electricity, which helps to
Speaker 1: explain why these countries have been so attractive to bitcoin
Speaker 1: miners in the past. Unfortunately for those minors, the combination
Speaker 1: of Russia's invasion of Ukraine, which affected energy availability, as
Speaker 1: well as rising inflation and environmental practice like drought have
Speaker 1: curbed the availability of cheap electricity in these regions, which
Speaker 1: means that minors and some of these areas could find
Speaker 1: themselves kicked out, if not regulated out of these markets.
Speaker 1: So miners are on the move again, forever chasing the
Speaker 1: combination of abundance electricity for relatively low prices. This time,
Speaker 1: some of them are even heading further north of the
Speaker 1: Arctic Circle. Joining me to discuss what's happening in the
Speaker 1: nordics is Bloomberg editor Lars Paulson. You know Sweden's financial regulator.
Speaker 1: They have come out and you know, called for a
Speaker 1: ban on on mining in Europe because of the environmental
Speaker 1: aspect than you know the fact that it sucks up
Speaker 1: so much energy. Lars, thank you so much for joining me.
Speaker 1: Thank you. Tell us a little bit more about who
Speaker 1: you are. Why don't you introduce yourself to our listeners?
Speaker 1: I am an editor and reporter in in Stockholm. I've
Speaker 1: been covering the energy markets in Europe for a very
Speaker 1: long time, about T T S, and it's an extremely
Speaker 1: exciting time. As you probably understand, affects the whole specter
Speaker 1: of the economy at development. What are some of the
Speaker 1: things that make energy in Europe exciting right now? Obviously
Speaker 1: started even before the Russia's invasion of Ukraine. Russia started
Speaker 1: to curb the gas export to Europe and then they
Speaker 1: obviously have more or less halted gas exports via we
Speaker 1: are an ALD stream and the impact of that has
Speaker 1: been immense on energy supplies in in Europe. And, you know,
Speaker 1: everything from cold to electricity and gas prices have skyrocketed.
Speaker 1: With that we have, you know, surging inflation. Much longer
Speaker 1: can inflation stay this elevated in Europe and have we
Speaker 1: seen the peak yet? You Energy Ministers calling for urgent
Speaker 1: measures attained the price of asked the energy crisis continuing
Speaker 1: to deepen. there. What do they mean by urgent measures? Worrying,
Speaker 1: of course. Eight point nine is the inflation right now
Speaker 1: for the eurozone. It was expected to be eight points.
Speaker 1: That obviously Ukraine Russian conflict is ading additional pressure. Gas
Speaker 1: prices are, you know, five six times higher than previous
Speaker 1: same time last year. You know, even though they are
Speaker 1: they are coming down a little bit now, but there
Speaker 1: are significantly higher. You know, they set records in the
Speaker 1: recent months. Same with power prices and cold prices. So
Speaker 1: you know, given this environment of rising prices like, what
Speaker 1: are the kinds of tradeoffs that people are seeing, both
Speaker 1: in terms of industrial consumers of power as well as, say, like,
Speaker 1: you know, homes and smaller businesses? Well, there's a lot
Speaker 1: of talk about energy uration Ng over the over the winter,
Speaker 1: there will be most likely will be, I should say,
Speaker 1: you know, rolling power cuts in several countries. You know,
Speaker 1: when demand peaks in the winter, that probably won't be
Speaker 1: enough electricity for everyone to go around. That's a pretty
Speaker 1: dire scenario that you're describing. It is, and it's all
Speaker 1: really all down to Russia's invation of Ukraine. There was
Speaker 1: a quote from the Energy Minister of Sweden back in
Speaker 1: July which I'll share, which is we need energy for
Speaker 1: more useful things than Bitcoin, to be honest. But to
Speaker 1: be honest, you know, sort of meet it for me.
Speaker 1: But the context of that interview was that Sweden, which
Speaker 1: is home to one of the largest bitcoin mining industries
Speaker 1: in Europe, was having to decide whether allowing energy intensive crypto,
Speaker 1: you know creators and validators to be setting up in
Speaker 1: the country is something that's going to continue to make sense,
Speaker 1: given exactly the dynamics that you're describing. Is there an
Speaker 1: environmental consideration as a result of folks going, you know,
Speaker 1: sort of further up, as it were? Are there any
Speaker 1: are there any energy questions or environmental questions that that
Speaker 1: you're seeing or that you're hearing from folks there? It's
Speaker 1: a little bit difficult to say at the moment how
Speaker 1: big this movement is, you know, because these companies, as
Speaker 1: you probably know, they tend to be quite you know,
Speaker 1: they don't want to give too much away about their operations.
Speaker 1: It's difficult to say how many companies are are actually
Speaker 1: moving up. What is clear, though, is that there is
Speaker 1: a move from southern Norway to northern Norway, and it's
Speaker 1: all down to come back to the cost of power.
Speaker 1: Is Power in northern Norway more easily accessible? Is it cheaper?
Speaker 1: What are the differ princes that are provoking this kind
Speaker 1: of move, in addition to the European energy crisis that's
Speaker 1: pushing up prices all over Europe? Southwest Norway where some
Speaker 1: of the where this particular minor was based, and that
Speaker 1: minor is, of course, Crypto Vault, with a K, just
Speaker 1: for fun exactly. They've had the extremely dry spring and
Speaker 1: virtually all of the power in this area is generated
Speaker 1: by hydro electricity and the dams are running almost empty
Speaker 1: at the moment, which means that this extremely little supply.
Speaker 1: So power prices have searched even more there. The CEO
Speaker 1: of the crypto vault told us that power prices up
Speaker 1: in the north, where he's going, or in the south
Speaker 1: rather where, hundred sixty times higher than the region up
Speaker 1: north where they're moving to. And this is because Norway
Speaker 1: and the rest of the Nordic redient is split into
Speaker 1: different price zones, and the reason why it can have
Speaker 1: such massive difference in prices is because there are bottlenecks
Speaker 1: between the different regions. So even if you have a
Speaker 1: surplus of power up in northern Norway, where they're moving to,
Speaker 1: you can't necessarily get that power easily down to southern
Speaker 1: Norway where it's most needed, and that's creating the massive
Speaker 1: price differences. These price zones are they sound like they're
Speaker 1: a fairly sort of a well established feature of of
Speaker 1: the country. Are you finding from your experience that those
Speaker 1: kinds of differentials, you know, a hundred and sixty times different,
Speaker 1: are increasingly common because of the dynamics that you're describing?
Speaker 1: Or is this still, does this still feel unusual to
Speaker 1: you in your experience, having reported on these markets for
Speaker 1: such a long time? I mean you have to one
Speaker 1: thing you have to take into count is that these
Speaker 1: prices are set on a day to day basis. Maybe
Speaker 1: the day that he was referring to, that was a
Speaker 1: particular huge number. The spread was big, but the spread
Speaker 1: is becoming increasingly volatile and you know, those kind of
Speaker 1: price differences are not uncommon. You know, some days they
Speaker 1: might be fifty times higher, twenty five times higher, this
Speaker 1: day it was hundred, sixty times higher. And how are
Speaker 1: other types of you know, big industrial consumers of power
Speaker 1: dealing with these fluctuating differentials. It seems like, you know,
Speaker 1: hedging is going to be an increasingly important part of
Speaker 1: anyone's strategy if they're trying to sort of survive these
Speaker 1: kinds of differentials, if they're operating in multiple parts of
Speaker 1: the country. The large companies are buying power several years
Speaker 1: ahead in some instances, several years ahead, several years ahead. Yeah,
Speaker 1: so the moment they might have bought power for this
Speaker 1: winter last year. So there might be all right, but
Speaker 1: there will obviously come a point when those hedges run
Speaker 1: out and that's when the price, the huge price games
Speaker 1: that we're seeing now, will hit them. So in the end,
Speaker 1: you know, or over time rather, it will be almost
Speaker 1: impossible for anyone to come through this without some major
Speaker 1: damage to their, you know, profits and balance sheets and
Speaker 1: so on. Coming up what the future may look like
Speaker 1: for crypto minors in Norway, Sweden and beyond, and what
Speaker 1: the implications are from the broader industry. The nordics are,
Speaker 1: or have been, presented as a great example of how
Speaker 1: you can have alternative to fossil fuels. But you know,
Speaker 1: I'm struck by what you said about like the dams
Speaker 1: are are running out of water. Like what are some
Speaker 1: of the lessons that folks are drawing from the experiences
Speaker 1: of these countries right now? You know, Norway has um
Speaker 1: you know it's quite often mentioned as the the green
Speaker 1: battery of of Europe during years of normal rainfall. You know,
Speaker 1: that's a that's a great position to be in because
Speaker 1: it exports a lot of power. But, like you know,
Speaker 1: in the same way you know that solar and wind
Speaker 1: is great when it when it's very sunny and it's
Speaker 1: very windy. The flip side, it's the intermittency. So if
Speaker 1: you have a like a really dry year in in
Speaker 1: Norway like we've had, they are extremely vulnerable and I
Speaker 1: guess you can say that that that's why you need
Speaker 1: both renewable energy and, you know, more plannable power. I
Speaker 1: think it's impossible to take, for example, nuclear completely out
Speaker 1: of out of the Nordic power system. You know, it's
Speaker 1: there as a backup. Sweden and is shutting down some
Speaker 1: of its some of its reactors, and that is also
Speaker 1: part of the reason why power prices are sarging. Well,
Speaker 1: let's actually touch on that, because one of the folks
Speaker 1: that things in crypto mining, especially bitcoin mining, tend to
Speaker 1: talk about is they're very interested in alternatives to, you know,
Speaker 1: fossil fuel based sources of energy. I haven't heard a
Speaker 1: lot of people say that they're ready to hook themselves
Speaker 1: up to nuclear reactors, but do say a little bit
Speaker 1: more about the conversation around nuclear in in Europe, particularly
Speaker 1: in the nordics. So it sounds like Sweden is scaling
Speaker 1: back there, while other countries are are thinking about at
Speaker 1: least not shutting down their existing plants. Is that correct?
Speaker 1: It's it's more a case of actually the election that
Speaker 1: we had now they that will probably change a long
Speaker 1: term position here. But what what's happened, if you if
Speaker 1: we go back a bit? So the reason why Sweden and,
Speaker 1: you know, the Nordic region has been so attractive to
Speaker 1: to Cryptomnus, you know, over the past x number of years,
Speaker 1: is that, you know, power prices are among the cheapest
Speaker 1: in the world there, and the reason for this is
Speaker 1: historically plenty of hydro power, plenty of nuclear and lots
Speaker 1: of wind power. So it's not like your dependent on
Speaker 1: a on a global price of gas or coal, for example.
Speaker 1: So that's kept the you know, the level of power
Speaker 1: pricing very low and at the same time, obviously it's
Speaker 1: Um it's green, it's green power, or at least fossil free.
Speaker 1: One of the consistent themes we've heard about and frankly,
Speaker 1: from crypto minors, and again especially bitcoin minors, is they
Speaker 1: are very mobile industry. Right. They will go and they can.
Speaker 1: They can sort of pickup shop, as it were, and
Speaker 1: move to places that have a better combination of abundant
Speaker 1: sources of power that, you know, priced relatively competitively. Is
Speaker 1: there anywhere in Europe that you're observing where those two
Speaker 1: things seem like they will be true in the long run?
Speaker 1: There won't be another Nordic expansion, so to speak. You know,
Speaker 1: I think the ones that are in the Nordic Kredian
Speaker 1: and the ones that can move up north, they will
Speaker 1: the same. It's the same situation in Sweden that in
Speaker 1: southern Sweden you have extremely high prices, in northern Sweden
Speaker 1: you have very cheap power most of the time. So
Speaker 1: you know, we mentioned early you're in this episode, the
Speaker 1: comment from the Swedish Energy Minister about not really perceiving
Speaker 1: the bitcoin is necessarily the most useful use of energy
Speaker 1: in the world. But you know, in general across the Nordics,
Speaker 1: I wouldn't say it's necessarily been hostile to crypto. It
Speaker 1: might not have been as enthusiastic or explicitly enthusiastic as
Speaker 1: Um as some other places. What's been your experience here
Speaker 1: in in region of how folks are thinking about Crypto
Speaker 1: and crypto assets? Well, from from what I picked up,
Speaker 1: you know, I think that the the governments are slightly
Speaker 1: they probably have a slightly more conservative attitude than elsewhere
Speaker 1: in the world. You know, Sweden's financial regulator, they have
Speaker 1: come out and, you know, called for a ban on
Speaker 1: onlining in Europe because of the environmental aspect and you
Speaker 1: know the fact that it sucks up so much energy.
Speaker 1: But you know, having said that, you know the general
Speaker 1: population are probably treating it a bit like everyone else
Speaker 1: in the world. You know, they love the speculation. You know,
Speaker 1: one recent example is there was a Swedish comedian who was,
Speaker 1: you know, extremely vocal on social media. He posted all
Speaker 1: his gains obviously when some of the cryptocurrencies, knows that
Speaker 1: we should do occasionally. You know, he did lose a
Speaker 1: hell of a lot of money and you know he
Speaker 1: posted about that as well, and you know people just
Speaker 1: love to to follow his story. It seems, as you say,
Speaker 1: it's very relatable right now, given give him a state
Speaker 1: of the markets. Yeah, definitely amazing. Well, thank you very
Speaker 1: very much again for taking the time. Um, these are
Speaker 1: complex topics and our listeners really benefit from getting world
Speaker 1: class reporters like you too sort of explain what's actually
Speaker 1: going on. So really appreciate it. Thank you very much
Speaker 1: for having me. A pleasure. You can find more of
Speaker 1: Laura's Poulson's reporting on the Bloomberg terminal on Bloomberg Dot
Speaker 1: Com and on twitter. He is LP e Poulson. That's
Speaker 1: L P E P A U L S S O N.
Speaker 1: on the next episode of Bloomberg Crypto. There's no real
Speaker 1: signs that we're anywhere close to the end of this
Speaker 1: current crypto winter, a chill that has wiped something like
Speaker 1: two trillion dollars worth of value off of the market.
Speaker 1: But what does to trillion, one trillion, three trillion even
Speaker 1: mean when we're talking about crypto assets? And why are
Speaker 1: some folks increasingly skeptical of whether these numbers represent any
Speaker 1: kind of correlation with actual economic value? This is Bloomberg Crypto,
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Speaker 1: Vicky Vergalina. Our senior producer is Janet Babin. Our producer
Speaker 1: is Sharon Barriro. Desta wonder at is our engineer. Original
Speaker 1: Music by Leo Sidron. I'm Stacy Marie Schmall. We'll be
Speaker 1: back tomorrow.