WEBVTT - Why Crypto Miners Are Moving to the Arctic Circle 0:00:02.640 --> 0:00:05.960 This is Bloomberg Crypto, a daily Bloomberg I heart podcast 0:00:06.400 --> 0:00:09.560 and I'm Stacy Marie Ishmael, managing editor of Crypto for 0:00:09.560 --> 0:00:29.000 Bloomberg News. It's Tuesday September. Sweden and Norway are home 0:00:29.040 --> 0:00:32.000 to some of the most abundant energy sources in the world, 0:00:32.440 --> 0:00:36.680 including Jew thermal, wind and Hydro Electricity, which helps to 0:00:36.720 --> 0:00:39.680 explain why these countries have been so attractive to bitcoin 0:00:39.760 --> 0:00:44.879 miners in the past. Unfortunately for those minors, the combination 0:00:44.920 --> 0:00:49.800 of Russia's invasion of Ukraine, which affected energy availability, as 0:00:49.840 --> 0:00:53.760 well as rising inflation and environmental practice like drought have 0:00:54.000 --> 0:00:58.600 curbed the availability of cheap electricity in these regions, which 0:00:58.640 --> 0:01:00.920 means that minors and some of these areas could find 0:01:00.920 --> 0:01:04.840 themselves kicked out, if not regulated out of these markets. 0:01:05.880 --> 0:01:08.600 So miners are on the move again, forever chasing the 0:01:08.720 --> 0:01:13.160 combination of abundance electricity for relatively low prices. This time, 0:01:13.400 --> 0:01:15.760 some of them are even heading further north of the 0:01:15.840 --> 0:01:18.840 Arctic Circle. Joining me to discuss what's happening in the 0:01:18.840 --> 0:01:23.800 nordics is Bloomberg editor Lars Paulson. You know Sweden's financial regulator. 0:01:24.080 --> 0:01:26.600 They have come out and you know, called for a 0:01:26.640 --> 0:01:30.520 ban on on mining in Europe because of the environmental 0:01:30.600 --> 0:01:34.440 aspect than you know the fact that it sucks up 0:01:34.520 --> 0:01:43.520 so much energy. Lars, thank you so much for joining me. 0:01:43.920 --> 0:01:46.400 Thank you. Tell us a little bit more about who 0:01:46.400 --> 0:01:48.600 you are. Why don't you introduce yourself to our listeners? 0:01:49.080 --> 0:01:53.400 I am an editor and reporter in in Stockholm. I've 0:01:53.400 --> 0:01:57.840 been covering the energy markets in Europe for a very 0:01:57.840 --> 0:02:02.960 long time, about T T S, and it's an extremely 0:02:02.960 --> 0:02:09.040 exciting time. As you probably understand, affects the whole specter 0:02:09.160 --> 0:02:12.280 of the economy at development. What are some of the 0:02:12.320 --> 0:02:16.600 things that make energy in Europe exciting right now? Obviously 0:02:16.760 --> 0:02:23.000 started even before the Russia's invasion of Ukraine. Russia started 0:02:23.040 --> 0:02:28.480 to curb the gas export to Europe and then they 0:02:28.520 --> 0:02:33.560 obviously have more or less halted gas exports via we 0:02:33.680 --> 0:02:36.440 are an ALD stream and the impact of that has 0:02:36.480 --> 0:02:41.000 been immense on energy supplies in in Europe. And, you know, 0:02:41.080 --> 0:02:46.760 everything from cold to electricity and gas prices have skyrocketed. 0:02:47.120 --> 0:02:51.360 With that we have, you know, surging inflation. Much longer 0:02:51.400 --> 0:02:54.880 can inflation stay this elevated in Europe and have we 0:02:54.919 --> 0:02:58.480 seen the peak yet? You Energy Ministers calling for urgent 0:02:58.520 --> 0:03:02.080 measures attained the price of asked the energy crisis continuing 0:03:02.120 --> 0:03:05.200 to deepen. there. What do they mean by urgent measures? Worrying, 0:03:05.240 --> 0:03:08.400 of course. Eight point nine is the inflation right now 0:03:08.480 --> 0:03:11.200 for the eurozone. It was expected to be eight points. 0:03:11.280 --> 0:03:16.519 That obviously Ukraine Russian conflict is ading additional pressure. Gas 0:03:16.520 --> 0:03:21.000 prices are, you know, five six times higher than previous 0:03:21.600 --> 0:03:24.400 same time last year. You know, even though they are 0:03:24.440 --> 0:03:27.040 they are coming down a little bit now, but there 0:03:27.040 --> 0:03:31.560 are significantly higher. You know, they set records in the 0:03:31.600 --> 0:03:36.800 recent months. Same with power prices and cold prices. So 0:03:36.920 --> 0:03:39.400 you know, given this environment of rising prices like, what 0:03:39.480 --> 0:03:41.640 are the kinds of tradeoffs that people are seeing, both 0:03:41.680 --> 0:03:46.000 in terms of industrial consumers of power as well as, say, like, 0:03:46.160 --> 0:03:49.960 you know, homes and smaller businesses? Well, there's a lot 0:03:49.960 --> 0:03:53.600 of talk about energy uration Ng over the over the winter, 0:03:54.280 --> 0:03:58.000 there will be most likely will be, I should say, 0:03:58.320 --> 0:04:01.800 you know, rolling power cuts in several countries. You know, 0:04:01.880 --> 0:04:06.360 when demand peaks in the winter, that probably won't be 0:04:06.480 --> 0:04:14.440 enough electricity for everyone to go around. That's a pretty 0:04:15.000 --> 0:04:19.840 dire scenario that you're describing. It is, and it's all 0:04:20.720 --> 0:04:24.800 really all down to Russia's invation of Ukraine. There was 0:04:24.800 --> 0:04:28.240 a quote from the Energy Minister of Sweden back in 0:04:28.320 --> 0:04:32.120 July which I'll share, which is we need energy for 0:04:32.240 --> 0:04:35.039 more useful things than Bitcoin, to be honest. But to 0:04:35.120 --> 0:04:37.200 be honest, you know, sort of meet it for me. 0:04:37.800 --> 0:04:43.080 But the context of that interview was that Sweden, which 0:04:43.120 --> 0:04:46.320 is home to one of the largest bitcoin mining industries 0:04:46.320 --> 0:04:54.280 in Europe, was having to decide whether allowing energy intensive crypto, 0:04:54.680 --> 0:04:56.920 you know creators and validators to be setting up in 0:04:56.920 --> 0:04:59.559 the country is something that's going to continue to make sense, 0:04:59.640 --> 0:05:05.080 given exactly the dynamics that you're describing. Is there an 0:05:05.200 --> 0:05:09.440 environmental consideration as a result of folks going, you know, 0:05:09.480 --> 0:05:12.400 sort of further up, as it were? Are there any 0:05:12.440 --> 0:05:15.919 are there any energy questions or environmental questions that that 0:05:16.000 --> 0:05:20.120 you're seeing or that you're hearing from folks there? It's 0:05:20.160 --> 0:05:23.680 a little bit difficult to say at the moment how 0:05:23.720 --> 0:05:27.960 big this movement is, you know, because these companies, as 0:05:28.000 --> 0:05:30.719 you probably know, they tend to be quite you know, 0:05:30.800 --> 0:05:34.039 they don't want to give too much away about their operations. 0:05:35.360 --> 0:05:38.679 It's difficult to say how many companies are are actually 0:05:38.720 --> 0:05:41.880 moving up. What is clear, though, is that there is 0:05:41.920 --> 0:05:47.480 a move from southern Norway to northern Norway, and it's 0:05:47.520 --> 0:05:52.080 all down to come back to the cost of power. 0:05:52.800 --> 0:05:59.000 Is Power in northern Norway more easily accessible? Is it cheaper? 0:05:59.360 --> 0:06:02.120 What are the differ princes that are provoking this kind 0:06:02.160 --> 0:06:07.240 of move, in addition to the European energy crisis that's 0:06:07.279 --> 0:06:12.240 pushing up prices all over Europe? Southwest Norway where some 0:06:12.400 --> 0:06:16.640 of the where this particular minor was based, and that 0:06:16.720 --> 0:06:19.840 minor is, of course, Crypto Vault, with a K, just 0:06:19.960 --> 0:06:26.440 for fun exactly. They've had the extremely dry spring and 0:06:26.600 --> 0:06:30.160 virtually all of the power in this area is generated 0:06:30.200 --> 0:06:34.799 by hydro electricity and the dams are running almost empty 0:06:34.839 --> 0:06:38.799 at the moment, which means that this extremely little supply. 0:06:39.400 --> 0:06:43.200 So power prices have searched even more there. The CEO 0:06:43.560 --> 0:06:47.760 of the crypto vault told us that power prices up 0:06:47.760 --> 0:06:50.520 in the north, where he's going, or in the south 0:06:50.720 --> 0:06:55.360 rather where, hundred sixty times higher than the region up 0:06:55.400 --> 0:06:58.960 north where they're moving to. And this is because Norway 0:06:59.040 --> 0:07:02.760 and the rest of the Nordic redient is split into 0:07:03.240 --> 0:07:06.480 different price zones, and the reason why it can have 0:07:06.560 --> 0:07:10.960 such massive difference in prices is because there are bottlenecks 0:07:11.080 --> 0:07:15.040 between the different regions. So even if you have a 0:07:15.120 --> 0:07:19.080 surplus of power up in northern Norway, where they're moving to, 0:07:19.520 --> 0:07:24.000 you can't necessarily get that power easily down to southern 0:07:24.000 --> 0:07:29.360 Norway where it's most needed, and that's creating the massive 0:07:29.480 --> 0:07:34.840 price differences. These price zones are they sound like they're 0:07:34.840 --> 0:07:38.640 a fairly sort of a well established feature of of 0:07:38.800 --> 0:07:42.720 the country. Are you finding from your experience that those 0:07:42.800 --> 0:07:46.960 kinds of differentials, you know, a hundred and sixty times different, 0:07:47.120 --> 0:07:52.400 are increasingly common because of the dynamics that you're describing? 0:07:52.600 --> 0:07:55.120 Or is this still, does this still feel unusual to 0:07:55.120 --> 0:07:57.800 you in your experience, having reported on these markets for 0:07:57.840 --> 0:08:00.440 such a long time? I mean you have to one 0:08:00.440 --> 0:08:03.640 thing you have to take into count is that these 0:08:03.640 --> 0:08:07.560 prices are set on a day to day basis. Maybe 0:08:07.560 --> 0:08:10.440 the day that he was referring to, that was a 0:08:10.520 --> 0:08:15.560 particular huge number. The spread was big, but the spread 0:08:15.680 --> 0:08:19.800 is becoming increasingly volatile and you know, those kind of 0:08:20.160 --> 0:08:24.760 price differences are not uncommon. You know, some days they 0:08:24.840 --> 0:08:28.760 might be fifty times higher, twenty five times higher, this 0:08:28.920 --> 0:08:32.199 day it was hundred, sixty times higher. And how are 0:08:32.559 --> 0:08:36.000 other types of you know, big industrial consumers of power 0:08:36.679 --> 0:08:40.000 dealing with these fluctuating differentials. It seems like, you know, 0:08:40.120 --> 0:08:42.920 hedging is going to be an increasingly important part of 0:08:43.040 --> 0:08:46.400 anyone's strategy if they're trying to sort of survive these 0:08:46.480 --> 0:08:48.840 kinds of differentials, if they're operating in multiple parts of 0:08:48.840 --> 0:08:54.000 the country. The large companies are buying power several years 0:08:54.040 --> 0:08:59.440 ahead in some instances, several years ahead, several years ahead. Yeah, 0:08:59.640 --> 0:09:03.080 so the moment they might have bought power for this 0:09:03.160 --> 0:09:07.040 winter last year. So there might be all right, but 0:09:07.240 --> 0:09:12.079 there will obviously come a point when those hedges run 0:09:12.120 --> 0:09:17.360 out and that's when the price, the huge price games 0:09:17.360 --> 0:09:21.200 that we're seeing now, will hit them. So in the end, 0:09:21.480 --> 0:09:24.600 you know, or over time rather, it will be almost 0:09:24.600 --> 0:09:30.520 impossible for anyone to come through this without some major 0:09:30.600 --> 0:09:34.640 damage to their, you know, profits and balance sheets and 0:09:34.640 --> 0:09:38.080 so on. Coming up what the future may look like 0:09:38.120 --> 0:09:41.720 for crypto minors in Norway, Sweden and beyond, and what 0:09:41.760 --> 0:09:58.960 the implications are from the broader industry. The nordics are, 0:09:59.600 --> 0:10:03.880 or have been, presented as a great example of how 0:10:03.960 --> 0:10:07.440 you can have alternative to fossil fuels. But you know, 0:10:07.480 --> 0:10:09.960 I'm struck by what you said about like the dams 0:10:10.000 --> 0:10:12.760 are are running out of water. Like what are some 0:10:12.840 --> 0:10:15.839 of the lessons that folks are drawing from the experiences 0:10:15.880 --> 0:10:19.240 of these countries right now? You know, Norway has um 0:10:19.480 --> 0:10:23.440 you know it's quite often mentioned as the the green 0:10:23.640 --> 0:10:29.240 battery of of Europe during years of normal rainfall. You know, 0:10:29.360 --> 0:10:33.520 that's a that's a great position to be in because 0:10:33.559 --> 0:10:38.720 it exports a lot of power. But, like you know, 0:10:38.760 --> 0:10:41.920 in the same way you know that solar and wind 0:10:42.040 --> 0:10:45.839 is great when it when it's very sunny and it's 0:10:45.960 --> 0:10:50.439 very windy. The flip side, it's the intermittency. So if 0:10:50.440 --> 0:10:52.640 you have a like a really dry year in in 0:10:52.720 --> 0:10:58.800 Norway like we've had, they are extremely vulnerable and I 0:10:58.840 --> 0:11:02.240 guess you can say that that that's why you need 0:11:02.480 --> 0:11:08.480 both renewable energy and, you know, more plannable power. I 0:11:08.520 --> 0:11:13.280 think it's impossible to take, for example, nuclear completely out 0:11:13.320 --> 0:11:17.320 of out of the Nordic power system. You know, it's 0:11:17.679 --> 0:11:21.240 there as a backup. Sweden and is shutting down some 0:11:21.400 --> 0:11:24.400 of its some of its reactors, and that is also 0:11:24.480 --> 0:11:28.199 part of the reason why power prices are sarging. Well, 0:11:28.280 --> 0:11:31.240 let's actually touch on that, because one of the folks 0:11:31.280 --> 0:11:33.800 that things in crypto mining, especially bitcoin mining, tend to 0:11:33.840 --> 0:11:37.640 talk about is they're very interested in alternatives to, you know, 0:11:37.720 --> 0:11:41.720 fossil fuel based sources of energy. I haven't heard a 0:11:41.760 --> 0:11:44.160 lot of people say that they're ready to hook themselves 0:11:44.240 --> 0:11:47.240 up to nuclear reactors, but do say a little bit 0:11:47.280 --> 0:11:52.800 more about the conversation around nuclear in in Europe, particularly 0:11:52.840 --> 0:11:56.559 in the nordics. So it sounds like Sweden is scaling 0:11:56.679 --> 0:12:00.120 back there, while other countries are are thinking about at 0:12:00.200 --> 0:12:02.920 least not shutting down their existing plants. Is that correct? 0:12:03.559 --> 0:12:07.080 It's it's more a case of actually the election that 0:12:07.160 --> 0:12:09.680 we had now they that will probably change a long 0:12:09.840 --> 0:12:13.319 term position here. But what what's happened, if you if 0:12:13.360 --> 0:12:17.840 we go back a bit? So the reason why Sweden and, 0:12:18.080 --> 0:12:21.360 you know, the Nordic region has been so attractive to 0:12:21.360 --> 0:12:25.280 to Cryptomnus, you know, over the past x number of years, 0:12:25.360 --> 0:12:28.600 is that, you know, power prices are among the cheapest 0:12:29.200 --> 0:12:32.200 in the world there, and the reason for this is 0:12:32.880 --> 0:12:36.920 historically plenty of hydro power, plenty of nuclear and lots 0:12:36.920 --> 0:12:40.080 of wind power. So it's not like your dependent on 0:12:40.160 --> 0:12:43.280 a on a global price of gas or coal, for example. 0:12:43.840 --> 0:12:47.360 So that's kept the you know, the level of power 0:12:47.400 --> 0:12:51.040 pricing very low and at the same time, obviously it's 0:12:51.200 --> 0:12:54.880 Um it's green, it's green power, or at least fossil free. 0:12:56.960 --> 0:13:02.600 One of the consistent themes we've heard about and frankly, 0:13:02.760 --> 0:13:07.120 from crypto minors, and again especially bitcoin minors, is they 0:13:07.120 --> 0:13:11.800 are very mobile industry. Right. They will go and they can. 0:13:11.840 --> 0:13:15.200 They can sort of pickup shop, as it were, and 0:13:15.280 --> 0:13:19.160 move to places that have a better combination of abundant 0:13:19.160 --> 0:13:24.600 sources of power that, you know, priced relatively competitively. Is 0:13:24.600 --> 0:13:29.200 there anywhere in Europe that you're observing where those two 0:13:29.240 --> 0:13:31.800 things seem like they will be true in the long run? 0:13:32.760 --> 0:13:38.040 There won't be another Nordic expansion, so to speak. You know, 0:13:38.120 --> 0:13:41.800 I think the ones that are in the Nordic Kredian 0:13:42.000 --> 0:13:45.400 and the ones that can move up north, they will 0:13:46.040 --> 0:13:48.840 the same. It's the same situation in Sweden that in 0:13:48.920 --> 0:13:54.040 southern Sweden you have extremely high prices, in northern Sweden 0:13:54.320 --> 0:13:58.640 you have very cheap power most of the time. So 0:13:58.800 --> 0:14:01.520 you know, we mentioned early you're in this episode, the 0:14:01.600 --> 0:14:06.079 comment from the Swedish Energy Minister about not really perceiving 0:14:06.120 --> 0:14:11.320 the bitcoin is necessarily the most useful use of energy 0:14:11.559 --> 0:14:15.959 in the world. But you know, in general across the Nordics, 0:14:16.000 --> 0:14:20.600 I wouldn't say it's necessarily been hostile to crypto. It 0:14:20.680 --> 0:14:24.760 might not have been as enthusiastic or explicitly enthusiastic as 0:14:25.400 --> 0:14:30.200 Um as some other places. What's been your experience here 0:14:30.240 --> 0:14:33.200 in in region of how folks are thinking about Crypto 0:14:33.240 --> 0:14:37.040 and crypto assets? Well, from from what I picked up, 0:14:37.160 --> 0:14:42.160 you know, I think that the the governments are slightly 0:14:42.240 --> 0:14:48.320 they probably have a slightly more conservative attitude than elsewhere 0:14:48.360 --> 0:14:51.880 in the world. You know, Sweden's financial regulator, they have 0:14:52.400 --> 0:14:54.520 come out and, you know, called for a ban on 0:14:54.800 --> 0:14:58.880 onlining in Europe because of the environmental aspect and you 0:14:58.920 --> 0:15:02.960 know the fact that it sucks up so much energy. 0:15:03.360 --> 0:15:06.000 But you know, having said that, you know the general 0:15:06.000 --> 0:15:09.880 population are probably treating it a bit like everyone else 0:15:09.920 --> 0:15:13.800 in the world. You know, they love the speculation. You know, 0:15:13.880 --> 0:15:17.880 one recent example is there was a Swedish comedian who was, 0:15:19.000 --> 0:15:23.600 you know, extremely vocal on social media. He posted all 0:15:23.640 --> 0:15:29.680 his gains obviously when some of the cryptocurrencies, knows that 0:15:29.960 --> 0:15:33.680 we should do occasionally. You know, he did lose a 0:15:33.720 --> 0:15:35.120 hell of a lot of money and you know he 0:15:35.160 --> 0:15:39.680 posted about that as well, and you know people just 0:15:39.800 --> 0:15:43.360 love to to follow his story. It seems, as you say, 0:15:43.360 --> 0:15:46.240 it's very relatable right now, given give him a state 0:15:46.280 --> 0:15:50.680 of the markets. Yeah, definitely amazing. Well, thank you very 0:15:50.840 --> 0:15:53.840 very much again for taking the time. Um, these are 0:15:54.200 --> 0:15:58.360 complex topics and our listeners really benefit from getting world 0:15:58.360 --> 0:16:01.280 class reporters like you too sort of explain what's actually 0:16:01.280 --> 0:16:04.040 going on. So really appreciate it. Thank you very much 0:16:04.080 --> 0:16:07.760 for having me. A pleasure. You can find more of 0:16:07.840 --> 0:16:11.160 Laura's Poulson's reporting on the Bloomberg terminal on Bloomberg Dot 0:16:11.160 --> 0:16:16.000 Com and on twitter. He is LP e Poulson. That's 0:16:16.280 --> 0:16:20.080 L P E P A U L S S O N. 0:16:25.040 --> 0:16:28.280 on the next episode of Bloomberg Crypto. There's no real 0:16:28.400 --> 0:16:30.960 signs that we're anywhere close to the end of this 0:16:31.080 --> 0:16:34.840 current crypto winter, a chill that has wiped something like 0:16:34.920 --> 0:16:37.960 two trillion dollars worth of value off of the market. 0:16:38.760 --> 0:16:42.880 But what does to trillion, one trillion, three trillion even 0:16:42.960 --> 0:16:45.840 mean when we're talking about crypto assets? And why are 0:16:45.880 --> 0:16:49.800 some folks increasingly skeptical of whether these numbers represent any 0:16:49.880 --> 0:16:57.200 kind of correlation with actual economic value? This is Bloomberg Crypto, 0:16:57.400 --> 0:17:00.680 a daily podcast from Bloomberg and I heart radio. For 0:17:00.760 --> 0:17:03.000 more shows from I heart radio, visit the I heart 0:17:03.080 --> 0:17:06.800 radio APP, apple podcasts or wherever you get your podcasts. 0:17:07.600 --> 0:17:10.160 Send US your comments, questions or suggestions for the show 0:17:10.320 --> 0:17:13.600 to Crypto at Bloomberg Dot net or find us on twitter. 0:17:13.840 --> 0:17:18.720 We're at CRYPTO. The supervising producer of Bloomberg Crypto is 0:17:18.800 --> 0:17:23.160 Vicky Vergalina. Our senior producer is Janet Babin. Our producer 0:17:23.240 --> 0:17:27.520 is Sharon Barriro. Desta wonder at is our engineer. Original 0:17:27.600 --> 0:17:31.560 Music by Leo Sidron. I'm Stacy Marie Schmall. We'll be 0:17:31.600 --> 0:17:32.200 back tomorrow.