How does energy crisis impact Bitcoin mining?

The answer to the question of what is an energy crisis is the situation that occurs as a result of the bottleneck in the supply side of energy resources or price increases. In 2022, there were dramatic increases in energy prices due to increasing inflation after Covid-19 and the Russia-Ukraine war. Energy prices, which had already started to rise from the supply-demand imbalance after the Covid-19, were subjected to another shock with the effect of the war. While this situation first pushed up oil and natural gas prices, the megawatt hour price of natural gas, which was €120 in February, tripled to €350 in September. Thus, the cost of electricity has reached historically high levels with the effect of energy prices. The table below shows the course of one-year energy prices in Europe.

How does energy crisis impact Bitcoin mining?

The production of cryptocurrencies, that is, mining operations, is done using electrical energy. Revenues of bitcoin mining companies hit two-year lows, driven by factors such as poor market performance, mining difficulty and rising energy prices. As a matter of fact, the decrease in Bitcoin hash rate in the last month has allowed miners to compensate for their losses to some extent. The hash rate is defined as the working speed of mining devices and the performance speed of Bitcoin miners. 

Although there are reports in the public that Bitcoin mining consumes a lot of electrical energy, the figures do not fully confirm this. About 120 terawatt hours of electricity are consumed annually for Bitcoin mining in the world. The electrical energy consumed for gold mining is approximately 135 terawatts/hour. In other words, the energy spent to find gold and the energy spent for Bitcoin are close to each other, and only 1% of the energy consumed all over the world is spent on cryptocurrency mining activities.