Here’s a story of the high-flying funny money that flew too close to the sun … and then ...
There are times in life when a moment crystallizes in your mind, and increasingly, at least for me, you can anticipate when the latest hot topic is about to jump the Shark.
My father is an astute businessman and a longtime savvy investor in many things. However, he is not the guy who’s up to speed on all things new and different. A few months back, he pulled me aside, apparently to share something of great value in confidence. In a near whisper, he offered, “They are going to stop using paper currency sometime soon, probably time to start moving some dollars into that cryptocurrency stuff.”
At that precise moment, I knew that if Dad was even aware that cryptocurrency existed ... that particular investment bubble was about to burst. Thanks for the tip, Dad. Using reverse logic, you were right on the money.
I am admittedly NOT a savvy investor. I am a steady saver, and my investing leans hard toward the more conservative side of the ledger ... money market CDs, municipal bonds, blue-chip stocks, even real estate. The risks of electronic cryptocurrency have largely kept me away, but I can also admit I don’t entirely get the concept.
An endless string of coding — mostly zeroes and ones — moving toward infinity, and supposedly in limited supply, while still being mined and manufactured daily in data centers across the globe.
International regulation is all but non-existent, the market is new enough that the federal government is still figuring it out, and extensive passcodes, which can get lost, create intricate access to even your own crypto holdings. Yet, this is a strong enough “free market” that the Trump sons have created a new crypto that has already increased the family's fortunes by a few billion “real” dollars.
Cryptocurrency miners run computers at top speed on racks in large warehouses 24/7, consuming vast amounts of electricity and water to keep them running cool. Currently, energy use by these collective data farms is approximately equal to Norway's domestic energy consumption. Or, a single data center has roughly the same energy footprint as 250,000 American homes.
That electricity can’t all come from sustainable sources, meaning the industry is also a net polluter. And whether your cryptocurrency of choice is Bitcoin, Luna, Ethereum, or some lesser-known entity, they all share one thing in common at present. After hitting peak prices in 2021, their values have since declined substantially. Several smaller cryptocurrencies have ceased operations, leaving investors holding the bag. In fact, the only part of the e-currency industry operating solidly in the black is the e-currency exchanges. They each make a small commission whether prices are going up or down.
The Federal Trade Commissioner (FTC) also reports that since January 2021, more than 46,000 Americans have been stung by crypto scams, even as many still believe in the myths of rapid wealth, despite current market dynamics. And of course, crypto boosters insist that all markets are cyclical and that their prices and values will recover.
For those crypto cheerleaders, I have five words for you to ponder: Electro-magnetic pulse and blackouts.
Domestically, the most recent green energy bill, signed into law during the Biden Administration — and intended to expedite massive market shifts, though now being dismantled by the Trump Administration — pushed aggressively toward more electric vehicles and the use of more sustainable energy sources.
Those are worthy goals, but as we are seeing globally and domestically with brownouts and blackouts during this summer of record heat, those “green” energy sources typically cannot provide high-demand baseload power in the same way as coal, natural gas, or nuclear-generated electricity.
Our grid is also not designed to accommodate the growing demand from e-vehicles in every home garage. In fact, unless we commit soon to a much larger, newer nuclear energy reactor fleet, we will soon be unable to meet base power demand in many urban areas during the summertime. And exacerbating the problem, our home state of Georgia has also become “project site central” for new data centers.
Who knew the kryptonite for high-flying cryptocurrencies might be a combination of green energy policy and sporadic and unpredictable power outages?
Of course, innovation can still save or turn around any industry that appears headed for a quick exit or downturn. And yes, the more reliable cryptocurrencies and data mining farms do have onsite backup generators. But even fail-safes can fail.