As Texas grapples with unexpected subzero temperatures, the state’s bitcoin mining operations have shut down due to high energy demand. This has freed up much needed electricity capacity in the state, while also leading to a sharp drop in the global Bitcoin hashrate.
Bitcoin Mining in Texas Faces Test as Subzero Weather Strikes
The plummeting temperatures sweeping through Texas have led to a significant drop in Bitcoin’s hashrate. As the Lone Star State battles with subzero conditions, bitcoin miners are curtailing operations, contributing to a notable 34% decrease in the global Bitcoin hashrate.
In a great thread on X preceding the freezing weather, James Mcavity, CEO of Cormint, Inc., described the impact of the current winter storm on the state’s power grid and the consequent response from Bitcoin miners.
There is a big winter storm crossing the country right now. This storm will put a strain on power grids
If prices get above $.1 – $.2 per kWh 95% of the bitcoin mining load will be offline across Texas, as usual. Let’s have a look at the storm & take a trip down memory lane
pic.twitter.com/esn9YfWqRf — James McAvity (@jamesmcavity) January 12, 2024
“If prices get above $.1 – $.2 per kWh 95% of the bitcoin mining load will be offline across Texas, as usual,” said Mcavity. This response mirrors a similar situation on Sep. 6, 2023, when Bitcoin miners responded to emergency conditions by curtailing operations to free up around 2,000 MW of capacity for residential use. Mcavity was right, the bitcoin miners went offline.
According to data from Ycharts, the Bitcoin network’s total 24-hour hashrate plummeted from over 629 exahash per second (EH/s) on Jan. 11 to around 415 EH/s by Jan. 15. The decrease aligns with the onset of freezing temperatures in Texas, a state that significantly contributes to the United States’ bitcoin mining activities.
Nic Carter, general partner at Castle Island Ventures and vocal Bitcoin advocate, explained the knock-on effects the weather can have on the cost of bitcoin fees. When Texas experiences a power shortage, the price of power naturally rises. “As a general rule of thumb, bitcoin miners in Texas are generally not operating when power prices are high,” Carter said. The Texas miners curtail their efforts, which is beneficial for grid stability but leads to the Bitcoin hashrate dropping. This in turn, “will drive down block arrival time (because bitcoin difficulty can’t react in time),” causing the mempool to fill up.
So net new transactional demand will be expressed in the form of higher fees… So new transactions will have to further outbid them to get into blocks. Hence fees will probably rise on Bitcoin due to the cold weather in Texas.
Despite the challenges, many mining firms have adapted by participating in demand response programs organized by the Electric Reliability Council of Texas (ERCOT). These programs compensate miners for adjusting their load during high-demand periods, exemplifying a symbiotic relationship between bitcoin mining and grid management.
As Texas navigates these extreme weather conditions, the state’s unique energy infrastructure and its interplay with bitcoin mining could serve as a model for other states in meeting and responding to power demands.
Do you think the Texas electricity grid model could be successfully exported to other states or countries? Share your thoughts and opinions about this subject in the comments section below.