If Big Oil Gets Into Bitcoin Mining, Is It Time to Buy Bitcoin?

Big Oil thinks it has a solution for the future of sustainable Bitcoin mining. Do Bitcoin investors agree?

Bitcoin (BTC 2.01%) mining stocks have been coming under greater and greater pressure to reduce their electricity consumption and shift into greener sources of energy. As a result, many of them have been embracing solar, wind, and hydro solutions to power their massive mining operations. But now comes a new wrinkle in the push toward greener, more sustainable Bitcoin mining: the entry of Big Oil. Shell (SHEL 3.90%) says it has an innovative new technology that can reduce costs and emissions for Bitcoin miners by as much as 48%. So what can we expect for the future of Bitcoin if Big Oil decides to move aggressively into mining?

The greening of Bitcoin mining

For now, Shell appears to be focusing on coolants and lubricants. Basically, Shell is saying it can help Bitcoin miners by making their operations run smoother and more efficiently. The centerpiece of Shell’s green energy initiative is something called Shell Immersion Cooling Fluid S5 X, which comes with high cooling efficiency and some impressive thermodynamic properties. But it also sounds like something you’d dump into your car’s engine to help it run better. At a time when countries around the world are banning Bitcoin mining due to the perceived negative impact these miners have on the environment, betting the future on a new engine coolant doesn’t sound like a radically innovative solution. But Shell is confident enough in its ability to shape the future of Bitcoin mining that it just signed up to become a two-year sponsor of the Bitcoin Conference, the largest Bitcoin event in the world. Already, the Shell logo has started to appear on the Bitcoin 2023 Conference website. In fact, Shell’s logo is next to the logo for CleanSpark, which bills itself as the largest sustainable mining operation in the world.

The bullish case for Bitcoin

On the one hand, any endeavor that helps to green the Bitcoin mining industry should be applauded. It has been coming under pressure recently from government bureaucrats and environmental activists, so something has to happen sooner rather than later to prove that miners are taking the environment seriously. In May, for example, environmental activists approached the U.S. Office of Science and Technology Policy to urge the U.S. government to study the energy and climate implications of Bitcoin mining. In September, the same science policy office published a landmark study, Climate and Energy Implications of Crypto-Assets in the United States, in which Bitcoin mining ended up being the villain due to its enormous energy consumption demands. So if Big Oil’s entry into Bitcoin mining helps to defuse some of these concerns, that’s obviously bullish for both Bitcoin miners and Bitcoin.

The bearish case for Bitcoin

On the other hand, it’s unclear how people are going to feel about Big Oil getting involved with crypto. The crypto industry is already suffering from a tarnished reputation, and getting Big Oil involved now surely can’t help, can it? When people think about Big Oil, they probably think about gas stations and massive gas pipelines. They probably don’t think about solar panels or wind farms or saving the environment. To get a sense of how crypto investors reacted to the Shell news, it’s interesting to take a look at the replies to the Shell Bitcoin sponsorship announcement on Twitter. While some Twitter users thought the news was bullish for crypto, others made pointed attacks on Shell’s reputation and suggested that Bitcoin should be looking elsewhere for partnerships. After all, Bitcoin is supposed to change the world, and that’s a hard case to make if mining operations are running on dirty fossil fuels.

The big picture for Bitcoin

Obviously, the entry of Big Oil into mining could have a huge impact on the Bitcoin ecosystem. New green energy initiatives coming from Big Oil could be a lifeline for troubled mining companies that have been reporting underwhelming numbers recently. Moreover, these initiatives could help to defuse any governmental push for greater regulatory oversight over Bitcoin. And they could help to deflect some of the negative rhetoric coming from environmental groups. That’s all very bullish for Bitcoin. I’m just worried about the perceived optics of crypto linking up with Big Oil. Instead of bringing more investors into the crypto space, it might drive them away, especially younger investors who have prioritized climate change and the environment. So keep your eyes on this space and realize that the entry of Big Oil into crypto comes with a mix of pros and cons.