Casey Wagner

<div id="highlights-block_63111910b5316" class="highlights">
 <ul>
 <li>Bitcoin’s price decline and the rising cost of power has made turning a profit difficult </li>
 <li>Some at-home miners opt to lose money on older setups, just for the learning experience</li>
 </ul>
 
</div>



With the price of bitcoin faltering and mining difficulty on the rise, crypto enthusiasts who once took home a pretty penny mining out of home garages are now finding it harder to break even.



Mining bitcoin at home today is much more challenging than in the early days of crypto. Mining equipment is costly and electricity does not come cheap, either, and the number of people willing to risk investing in bitcoin mining operations has shrunk.



“In terms of demand, it declined in June very, very significantly,” Lauren Lin, operations manager at mining pool Luxor, said. “However, at the beginning of August, the demand has been picking up, partly because the bitcoin price went up a little from June’s decline and also more hosting sites have come online.”&nbsp;



Hosting sites are data centers where miners can store and operate their equipment for a fee. The infrastructure that comes with bitcoin mining, at least to be profitable, is substantial, Lin said.&nbsp;



“To mine at home, it not only requires the capital to purchase the ASIC [application-specific integrated circuit rig], you need to know how to ventilate, you need to know how to deal with the noise and the heat, there’s a lot to consider,” Lin said.&nbsp;



Profitability is first and foremost the top concern for most miners, Lin added, and recently, it’s been harder to turn a profit. More first-time miners have been purchasing S9 mining units, an older model that does not produce enough bitcoin to offset the electricity costs.&nbsp;



“I will say, at least for our customer base, the people doing this have the main purpose to test how mining works,” Lin said. “If you are mining at home, with residential power rates, an S9 is not profitable at all, but you would get some experience.”



<h3 class="wp-block-heading">Bitcoin mining at home no match for major companies</h3>



Corporations keen to cash in on the crypto demand have been on the rise as well, further pushing out garage-based operations.&nbsp;



“The big boys are playing hard and employing multiple strategies to make a profit from their sites,” Sam Doctor and David Bellman, mining researchers at analytics firm BitOoda, wrote in a recent note.&nbsp;



The ‘big boys,’ i.e., the major corporations that have entered the mining space in recent years, are diversifying their revenue streams to weather rocky market conditions. Nasdaq-listed Stronghold Digital Mining has been selling power to the grid — and its mining machines — to <a href="https://cms.blockworks.co/crashing-prices-expose-bitcoin-mining-industrys-addiction-to-leverage/" target="_blank" rel="noreferrer noopener">cover debt</a>.&nbsp;



Other companies have shifted gears entirely. Bitcoin miners in Rochester, New York have brought a retired power plant back into operation to generate new cryptocurrency.



Private-equity firm Atlas Holdings purchased Greenidge Generation in 2014 and converted the coal-fired power plant to natural gas. In 2021, the company started using the generated power to mine bitcoin. There is now <a href="https://cms.blockworks.co/new-york-passes-bill-restricting-carbon-fueled-crypto-mining-operations/" target="_blank" rel="noreferrer noopener">legislation in New York</a> aiming to prevent new operations from drawing on fossil fuels.&nbsp;



There has also been a shift in geography, Lin added, especially in the wake of <a href="https://cms.blockworks.co/china-mining-exodus-seen-as-positive-for-bitcoin/" target="_blank" rel="noreferrer noopener">China’s ban</a> on mining operations. Mining activity has picked up across Europe and South America, Lin said.&nbsp;



“Starting from the end of last year, we&#8217;re seeing more and more South American miners scaling up,” Lin said. “Around the time of the China mining ban, they were still purchasing a very old generation of ASICs, now, they are moving into the latest generation of the ASICs.”



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The Days of Lucrative Bitcoin Mining at Home are Over

Sebastian Sinclair

<div id="highlights-block_62200f71c9e13" class="highlights">
 <ul>
 <li>Democrats in the US are seeking answers from the Department of the Treasury over its effectiveness to monitor Russian evasion of sanctions using crypto</li>
 <li>Questions come as bitcoin&#8217;s rise against the ruble has skyrocketed in recent days</li>
 </ul>
 
</div>



Four Democratic Senators have asked the Treasury to define its strategy for monitoring and enforcing crypto sanctions compliance following concerns Russia may be using digital assets to evade its economic penalties.



In a <a href="https://www.warren.senate.gov/imo/media/doc/2022.03.01%20Letter%20to%20Treasury%20re%20OFAC%20crypto%20sanctions%20enforcement.pdf" target="_blank" rel="noreferrer noopener">letter</a> penned to Treasury Secretary Janet Yellen on Wednesday, Senators Elizabeth Warren, Mark Warner, Sherrod Brown and Jack Reed voiced their concerns that &#8220;criminals&#8221; and &#8220;rogue states&#8221; are using crypto as a &#8220;new means to hide cross-border transactions for nefarious purposes.&#8221;



The crisis in Ukraine has all but reenergized the US&#8217;s efforts to crack down on what it perceives as criminal-related crypto activity.



<blockquote class="wp-block-quote">&#8220;Concerns have become even more urgent given the sanctions imposed on Russia after its invasion of Ukraine and reports that Russian entities are preparing to blunt some of the worst effects of the sanctions that have been levied on the country by using the array of “cryptocurrency-related tools as its disposal,&#8221; the letter said.</blockquote>



The Treasury defines sanctions as <a href="https://home.treasury.gov/system/files/136/Treasury-2021-sanctions-review.pdf" target="_blank" rel="noreferrer noopener">economic and financial tools</a> of &#8220;first resort&#8221; used to address a number of threats to national security, foreign policy and the economic health of the US.



Following Russia&#8217;s invasion of Ukraine, the West has imposed economic restrictions on the former Soviet state, hoping to apply enough pressure elicit a ceasefire and troop withdrawal.



Sanctions, while not yet fully implemented, are already sending shockwaves across the global financial ecosystem with some assets fairing better than others.



As a result, Russia&#8217;s largest lender, Sberbank, lost 95% of its value on the London stock exchange on Wednesday following a run on deposits. Other London-listed stocks, including Lukoil, Novatek and Rosneft, also suffered significant hits. Russia&#8217;s ruble collapsed and is now trading at less than a penny ($0.0098).



In anticipation of the senators concerns, Jake Chervinsky, head of policy at the Blockchain Association, a Washington-based industry group, <a href="https://twitter.com/jchervinsky/status/1498786025438650369" target="_blank" rel="noreferrer noopener">took to Twitter</a> to argue that crypto cannot be used to mitigate sanctions.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ Russia can&#39;t &amp; won&#39;t use crypto to evade sanctions. Concerns about crypto&#39;s use for sanctions evasion are totally unfounded. They fundamentally misunderstand: &#8211; how sanctions work &#8211; how crypto markets work &#8211; how Putin is actually trying to mitigate sanctions I&#39;ll explain 🧵&mdash; Jake Chervinsky (@jchervinsky) <a href="https://twitter.com/jchervinsky/status/1498786025438650369?ref_src=twsrc%5Etfw">March 1, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In particular, he wrote, &#8220;US persons around the world are cutting ties with Russian [Specially Designated Nationals And Blocked Persons] right now, regardless of what payment systems they were using previously.&#8221;



<blockquote class="wp-block-quote">&#8220;There&#8217;s zero reason to think crypto&#8217;s existence will convince any of them to willfully violate sanctions laws, risking fines &amp; jail time.&#8221;</blockquote>



Meanwhile, crypto is <a href="https://cms.blockworks.co/market-wrap-bitcoin-eth-see-massive-pump-as-russian-ruble-crumbles/" target="_blank" rel="noreferrer noopener">reported</a> to have responded favorably to affected Russian oligarchs and businesses seeking financial shelter.



&#8220;Trading volumes between the Russian ruble and Bitcoin have spiked to their highest level since May 2021 in recent days following the wave of sanctions announcements,&#8221; the senators said in their letter.



<h3 class="wp-block-heading">Democrats request more from crypto community </h3>



The letter also provides specific examples of what the US sees as the crypto community&#8217;s disregard for financial law. 



One such instance includes mining company Marathon Digital&#8217;s refusal and then backflip in May over its decision to process transactions from wallets listed on the Office of Foreign Assets Control&#8217;s (OFAC) Specially Designated Nationals and Blocked Persons List.



OFAC is the Treasury&#8217;s financial intelligence and enforcement agency focused on issuing and enforcing sanctions based on US foreign policy and national security objectives.



Another instance included the mention of DeFi and its use of smart contracts, that seek to supplant brokers, banks and financial intermediaries, as a growing threat to financial stability and sanctions controls.



&#8220;The cryptocurrency industry may not be fulfilling its responsibility to comply with US sanctions,&#8221; the letter reads. &#8220;<a href="https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf" target="_blank" rel="noreferrer noopener">OFAC’s October guidance</a> notes that many “members of the virtual currency industry implement OFAC sanctions policies and procedures months, or even years, after commencing operations.&#8221;



As such, the four Democrats said they are seeking information from the Treasury over measures the department is intending to take in relation to the OFAC&#8217;s guidance to enforce sanctions compliance by crypto participants.



Questions were also put forth by the senators to the Treasury including how OFAC works with foreign governments to ensure crypto does not avoid sanctions, challenges faced by the agency under the October guidance and how many times self-disclosed sanctions violations have occurred.



A further two questions were asked relating to how DeFi&#8217;s (decentralized finance) growth has contributed to &#8220;maligned actors'&#8221; ability to avoid sanctions and the agency&#8217;s capacity to enforce them as well as what further legal tools and funding are required to avoid Russia&#8217;s evasions.



The senators are requesting a response to their questions along with information by no later than March 23.



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US Democrats Ask Treasury What Effect Cryptoassets Have on Russian Sanctions

<div id="highlights-block_6217ed102d12c" class="highlights">
 <ul>
 <li>Economists warn 2022 will not see the same economic growth as 2021</li>
 <li>US GDP increased at a 7% annualized rate in the fourth quarter</li>
 </ul>
 
</div>



Though the US economy grew slightly faster in 2021 than previously estimated, the surge has not spilled over into 2022 as risk assets, including cryptocurrencies, have faltered.



The uncertainty, coupled with rising concerns over <a href="https://cms.blockworks.co/bitcoins-plunge-on-ukraine-invasion-undermines-status-as-digital-gold/" target="_blank" rel="noreferrer noopener">conflict in Eastern Europe</a>, has sent risk assets into a spiral.



“As far as the dollar goes, it is showing itself as the safe haven that it is,” Steve Van Metre, founder of Steve Van Metre Financial, said. “Whereas bitcoin is not a safe haven, which is why it is showing signs of weakness against the dollar and is likely to decline further should the dollar continue to rally.”



<a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-second-estimate" target="_blank" rel="noreferrer noopener">Updated figures</a> released Thursday show US gross domestic product increased at a 7% annualized rate during the last quarter of 2021, a slight increase from the 6.9% annualized rate reported in January.



“The GDP numbers are the second revision and reflect massive amounts of fiscal and monetary stimulus,” Van Metre said. “What matters now is going forward.”



The Atlanta Federal Reserve’s <a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-second-estimate" target="_blank" rel="noreferrer noopener">GDPNow</a> model, an algorithmic assessment of domestic growth based on economic reports, predicts the economy will grow 1.3% this quarter. Human economists have a rosier outlook, calling for a 2% bump.



While growth may be on the rise, inflation persists. The consumer price index rose <a href="https://cms.blockworks.co/market-recap-inflation-keeps-rising-stocks-and-cryptos-slide/" target="_blank" rel="noreferrer noopener">0.6% in January</a>, bumping the year-over-year figure to 7.5% — the quickest rise in four decades. It could mark a sign of a pending economic slowdown, some analysts say.



“There have been eight recessions in the United States over the last 60 years, and in every case, inflation declined noticeably,” said Nicholas Colas, co-founder of DataTrek Research. “US inflation has never declined from +5 percent back to the Fed’s target of 2 percent without a recession. Since CPI inflation is currently 7.5 percent, that’s an important, if unwelcomed, fact.”



Deflationary periods typically occur in tandem with sudden drops in energy prices, though that’s not happening now, Colas added.



​​”We are sure every Fed economist and [Federal Open Market Committee] member, including Chair Powell, knows this historical relationship between recessions and inflation,” Colas said. “They would very much like to avoid the former even as they bring the latter under control. The trouble is there is no playbook for that outcome.”



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