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

Bitcoin (BTC -2.28%) Mining shares have come under greater and greater pressure to reduce electricity consumption and switch to greener energy sources. As a result, many of them have adopted solar, wind and hydropower solutions to run their massive mining operations.

But now comes a new wrinkle in the push towards greener, more sustainable Bitcoin mining: the entry of Big Oil. Shell (SHELL -2.23%) 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 go aggressively into mining?

Greening of Bitcoin Mining

For now, Shell seems to be focusing on coolants and lubricants. Basically, Shell says it can help Bitcoin miners by making their operations smoother and more efficient. 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 because of 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.

Image source: Getty Images.

But Shell is confident enough in its ability to shape the future of Bitcoin mining that it has just signed up to become a biennial sponsor of the Bitcoin Conference, the largest Bitcoin event in the world. Already, the Shell logo has started to appear on the website of the Bitcoin 2023 Conference. In fact, Shell’s logo is next to the logo for CleanSparkwhich is considered the largest sustainable mining operation in the world.

The Bullish Case for Bitcoin

On the one hand, any effort that helps green the Bitcoin mining industry should be applauded. It has recently come under pressure from government bureaucrats and environmental activists, so something needs to happen sooner rather than later to prove that miners take the environment seriously.

In May, for example, environmental activists approached the US Office of Science and Technology Policy to urge the US 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, where Bitcoin mining ended up being the villain due to its huge energy consumption requirements. So if Big Oil’s entry into Bitcoin mining helps defuse some of these concerns, it’s obviously bullish for both Bitcoin miners and Bitcoin.

The bearish case for Bitcoin

On the other hand, it is unclear how people will feel about Big Oil getting involved in crypto. The crypto industry is already suffering from a tarnished reputation, and it can’t help getting Big Oil involved now, can it? When people think of Big Oil, they probably think of 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 is interesting to take a look at the responses to the Shell Bitcoin sponsorship announcement on Twitter. While some Twitter users thought the news was bullish for crypto, others made scathing attacks on Shell’s reputation and suggested Bitcoin should look elsewhere for partnerships. After all, Bitcoin is supposed to change the world, and that’s a hard case to make if mining runs 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 reported underwhelming numbers recently. Moreover, these initiatives could help defuse any government push for greater regulatory oversight of Bitcoin. And they can help deflect some of the negative rhetoric coming from environmental groups.

It’s all very bullish for Bitcoin. I’m just concerned about the perceived optics of crypto being paired with Big Oil. Instead of bringing more investors into the crypto space, it could 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.