Why Crypto Miners Are Moving to the Arctic Circle

miners in the past. Unfortunately for those minors, the combination of Russia's invasion of Ukraine, which affected energy availability, as well as rising inflation and environmental practice like drought have curbed the availability of cheap electricity in these regions, which means that minors and some of these areas could find themselves kicked out, if not regulated out of these markets. So miners are on the move again, forever chasing the

combination of abundance electricity for relatively low prices. This time, some of them are even heading further north of the Arctic Circle. Joining me to discuss what's happening in the nordics is Bloomberg editor Lars Paulson. You know Sweden's financial regulator. They have come out and you know, called for a ban on on mining in Europe because of the environmental aspect than you know the fact that it sucks up so much energy. Lars, thank you so much for joining me.

Thank you. Tell us a little bit more about who you are. Why don't you introduce yourself to our listeners? I am an editor and reporter in in Stockholm. I've been covering the energy markets in Europe for a very long time, about T T S, and it's an extremely exciting time. As you probably understand, affects the whole specter of the economy at development. What are some of the things that make energy in Europe exciting right now? Obviously

started even before the Russia's invasion of Ukraine. Russia started to curb the gas export to Europe and then they obviously have more or less halted gas exports via we are an ALD stream and the impact of that has been immense on energy supplies in in Europe. And, you know, everything from cold to electricity and gas prices have skyrocketed. With that we have, you know, surging inflation. Much longer can inflation stay this elevated in Europe and have we

seen the peak yet? You Energy Ministers calling for urgent measures attained the price of asked the energy crisis continuing to deepen. there. What do they mean by urgent measures? Worrying, of course. Eight point nine is the inflation right now for the eurozone. It was expected to be eight points. That obviously Ukraine Russian conflict is ading additional pressure. Gas prices are, you know, five six times higher than previous

same time last year. You know, even though they are they are coming down a little bit now, but there are significantly higher. You know, they set records in the recent months. Same with power prices and cold prices. So you know, given this environment of rising prices like, what are the kinds of tradeoffs that people are seeing, both in terms of industrial consumers of power as well as, say, like,

you know, homes and smaller businesses? Well, there's a lot of talk about energy uration Ng over the over the winter, there will be most likely will be, I should say, you know, rolling power cuts in several countries. You know, when demand peaks in the winter, that probably won't be enough electricity for everyone to go around. That's a pretty dire scenario that you're describing. It is, and it's all

really all down to Russia's invation of Ukraine. There was a quote from the Energy Minister of Sweden back in July which I'll share, which is we need energy for more useful things than Bitcoin, to be honest. But to be honest, you know, sort of meet it for me.

But the context of that interview was that Sweden, which is home to one of the largest bitcoin mining industries in Europe, was having to decide whether allowing energy intensive crypto, you know creators and validators to be setting up in the country is something that's going to continue to make sense, given exactly the dynamics that you're describing. Is there an environmental consideration as a result of folks going, you know,

sort of further up, as it were? Are there any are there any energy questions or environmental questions that that you're seeing or that you're hearing from folks there? It's a little bit difficult to say at the moment how big this movement is, you know, because these companies, as you probably know, they tend to be quite you know, they don't want to give too much away about their operations. It's difficult to say how many companies are are actually

moving up. What is clear, though, is that there is a move from southern Norway to northern Norway, and it's all down to come back to the cost of power. Is Power in northern Norway more easily accessible? Is it cheaper? What are the differ princes that are provoking this kind of move, in addition to the European energy crisis that's

pushing up prices all over Europe? Southwest Norway where some of the where this particular minor was based, and that minor is, of course, Crypto Vault, with a K, just for fun exactly. They've had the extremely dry spring and virtually all of the power in this area is generated by hydro electricity and the dams are running almost empty at the moment, which means that this extremely little supply.

So power prices have searched even more there. The CEO of the crypto vault told us that power prices up in the north, where he's going, or in the south rather where, hundred sixty times higher than the region up north where they're moving to. And this is because Norway and the rest of the Nordic redient is split into different price zones, and the reason why it can have such massive difference in prices is because there are bottlenecks

between the different regions. So even if you have a surplus of power up in northern Norway, where they're moving to, you can't necessarily get that power easily down to southern Norway where it's most needed, and that's creating the massive price differences. These price zones are they sound like they're a fairly sort of a well established feature of of

the country. Are you finding from your experience that those kinds of differentials, you know, a hundred and sixty times different, are increasingly common because of the dynamics that you're describing? Or is this still, does this still feel unusual to you in your experience, having reported on these markets for such a long time? I mean you have to one thing you have to take into count is that these prices are set on a day to day basis. Maybe the day that he was referring to, that was a

particular huge number. The spread was big, but the spread is becoming increasingly volatile and you know, those kind of price differences are not uncommon. You know, some days they might be fifty times higher, twenty five times higher, this day it was hundred, sixty times higher. And how are other types of you know, big industrial consumers of power

dealing with these fluctuating differentials. It seems like, you know, hedging is going to be an increasingly important part of anyone's strategy if they're trying to sort of survive these kinds of differentials, if they're operating in multiple parts of the country. The large companies are buying power several years ahead in some instances, several years ahead, several years ahead. Yeah, so the moment they might have bought power for this

winter last year. So there might be all right, but there will obviously come a point when those hedges run out and that's when the price, the huge price games that we're seeing now, will hit them. So in the end, you know, or over time rather, it will be almost impossible for anyone to come through this without some major damage to their, you know, profits and balance sheets and so on. Coming up what the future may look like for crypto minors in Norway, Sweden and beyond, and what

the implications are from the broader industry. The nordics are, or have been, presented as a great example of how you can have alternative to fossil fuels. But you know, I'm struck by what you said about like the dams are are running out of water. Like what are some of the lessons that folks are drawing from the experiences of these countries right now? You know, Norway has um you know it's quite often mentioned as the the green

battery of of Europe during years of normal rainfall. You know, that's a that's a great position to be in because it exports a lot of power. But, like you know, in the same way you know that solar and wind is great when it when it's very sunny and it's very windy. The flip side, it's the intermittency. So if you have a like a really dry year in in Norway like we've had, they are extremely vulnerable and I guess you can say that that that's why you need

both renewable energy and, you know, more plannable power. I think it's impossible to take, for example, nuclear completely out of out of the Nordic power system. You know, it's there as a backup. Sweden and is shutting down some of its some of its reactors, and that is also

part of the reason why power prices are sarging. Well, let's actually touch on that, because one of the folks that things in crypto mining, especially bitcoin mining, tend to talk about is they're very interested in alternatives to, you know, fossil fuel based sources of energy. I haven't heard a lot of people say that they're ready to hook themselves up to nuclear reactors, but do say a little bit more about the conversation around nuclear in in Europe, particularly

in the nordics. So it sounds like Sweden is scaling back there, while other countries are are thinking about at least not shutting down their existing plants. Is that correct? It's it's more a case of actually the election that we had now they that will probably change a long term position here. But what what's happened, if you if

we go back a bit? So the reason why Sweden and, you know, the Nordic region has been so attractive to to Cryptomnus, you know, over the past x number of years, is that, you know, power prices are among the cheapest in the world there, and the reason for this is historically plenty of hydro power, plenty of nuclear and lots of wind power. So it's not like your dependent on a on a global price of gas or coal, for example.

So that's kept the you know, the level of power pricing very low and at the same time, obviously it's Um it's green, it's green power, or at least fossil free. One of the consistent themes we've heard about and frankly, from crypto minors, and again especially bitcoin minors, is they are very mobile industry. Right. They will go and they can. They can sort of pickup shop, as it were, and move to places that have a better combination of abundant

sources of power that, you know, priced relatively competitively. Is there anywhere in Europe that you're observing where those two things seem like they will be true in the long run? There won't be another Nordic expansion, so to speak. You know, I think the ones that are in the Nordic Kredian and the ones that can move up north, they will the same. It's the same situation in Sweden that in southern Sweden you have extremely high prices, in northern Sweden

you have very cheap power most of the time. So you know, we mentioned early you're in this episode, the comment from the Swedish Energy Minister about not really perceiving the bitcoin is necessarily the most useful use of energy in the world. But you know, in general across the Nordics, I wouldn't say it's necessarily been hostile to crypto. It might not have been as enthusiastic or explicitly enthusiastic as

Um as some other places. What's been your experience here in in region of how folks are thinking about Crypto and crypto assets? Well, from from what I picked up, you know, I think that the the governments are slightly they probably have a slightly more conservative attitude than elsewhere

in the world. You know, Sweden's financial regulator, they have come out and, you know, called for a ban on onlining in Europe because of the environmental aspect and you know the fact that it sucks up so much energy. But you know, having said that, you know the general population are probably treating it a bit like everyone else in the world. You know, they love the speculation. You know, one recent example is there was a Swedish comedian who was,

you know, extremely vocal on social media. He posted all his gains obviously when some of the cryptocurrencies, knows that we should do occasionally. You know, he did lose a hell of a lot of money and you know he posted about that as well, and you know people just love to to follow his story. It seems, as you say, it's very relatable right now, given give him a state of the markets. Yeah, definitely amazing. Well, thank you very

very much again for taking the time. Um, these are complex topics and our listeners really benefit from getting world class reporters like you too sort of explain what's actually going on. So really appreciate it. Thank you very much for having me. A pleasure. You can find more of Laura's Poulson's reporting on the Bloomberg terminal on Bloomberg Dot Com and on twitter. He is LP e Poulson. That's L P E P A U L S S O N.

on the next episode of Bloomberg Crypto. There's no real signs that we're anywhere close to the end of this current crypto winter, a chill that has wiped something like two trillion dollars worth of value off of the market. But what does to trillion, one trillion, three trillion even mean when we're talking about crypto assets? And why are some folks increasingly skeptical of whether these numbers represent any kind of correlation with actual economic value? This is Bloomberg Crypto,

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