Editor's note: Today's AI and cryptocurrency booms are consuming more power than ever... And it's only set to ramp up in the future. According to our colleague, crypto expert Eric Wade, this could eventually lead to an energy-supply crunch. But as he explains in this piece – adapted from a recent issue of Crypto Capital – one unique opportunity in the crypto space could also help solve this problem...
The 'Energy Supercycle' Will Transform Cryptos By Eric Wade, editor, Crypto Capital
Most of us take energy for granted... We use it every day. And as a result, we like to think we understand how the energy market works. For example, gas prices tend to go up in the summer and down in the winter because more people travel during warmer months. And natural gas prices often rise in the winter as heating needs increase. These patterns are predictable... which creates a false sense of security. But a sudden shift in supply and demand could create a lot of volatility. Global energy consumption has skyrocketed over the past year. And it's expected to increase even more in the years ahead... which could push energy prices higher than we've ever seen before. We're about to see an "energy supercycle." When it begins, companies will have to compete for resources much more aggressively. And recently, one sector has already caused an explosion in energy demand... You might think I'm talking about crypto mining – but I'm not. True, bitcoin (BTC) is well known for using enormous amounts of energy. Millions of computers make quadrillions of calculations to secure the network... all of which require power. In 2023, bitcoin used around the same amount of energy as the Netherlands. That's because bitcoin is a Proof-of-Work ("PoW") coin. Miners have to prove they did an extraordinary amount of work to earn a reward. It's one way to show transactions are authentic. Proof-of-Stake blockchains, on the other hand, don't require much energy to validate transactions and secure the chain. This is why bitcoin miners have become a target for environmentalists who claim that PoW is wasteful. But the crypto space still isn't the sector with the fastest-growing demand for energy. That crown goes to artificial intelligence ("AI"). Regular DailyWealth readers know I expect AI to become a huge part of our everyday lives. We're already seeing more individuals, companies, and governments use AI (and crypto) to help run their systems, process transactions, store records, and plan major decisions. The potential uses are unlimited. That's why I think AI is going to be a big catalyst for cryptos going forward... For example, by using AI and the blockchain, doctors can quickly comb through patient records to come back with a personalized treatment plan. They can consider hundreds – maybe even thousands – of past cases to predict the best chance of a successful treatment. Meanwhile, companies like Merrill Lynch and Vanguard are using AI and the blockchain to run their clients' portfolios through hundreds of financial scenarios to test how well they'll hold up between now and the time their clients retire. In short, companies all over the world are finding ways to use these technologies. But AI requires an incredible amount of energy – even more than most cryptos. It has already been straining power grids in the U.S... Just look at northern Virginia's "Data Center Alley" for proof. Virginia-based Dominion Energy had to halt connections to new data centers for around three months in 2022 due to increased demand from AI. And AES, another Virginia-based energy company, recently told investors that because of AI's growth, data centers could make up 7.5% of total U.S. energy consumption in the coming years. It's the same picture worldwide... The International Energy Agency projects global electricity demand to rise by nearly 25% by 2040, largely driven by AI and data centers. Meanwhile, supply is struggling to keep up. The supply of energy from fossil fuels is expected to peak before 2030. And renewable-energy sources aren't being developed fast enough to meet users' needs. This is a new imbalance of supply and demand. And it could push energy prices to levels we've never seen before. Cryptos, AI companies, manufacturing firms, electric-car companies, individual users, and payment-processing companies will all be competing for energy in the years ahead... As demand overtakes supply, companies may limit user transactions, prioritize critical operations over others, and have to implement shutdowns. This could lead to slower processing times, higher prices, and restricted access to services for customers. Eventually, the world won't have enough energy to go around... so investing in energy-efficient technologies will be essential. This is a problem that will need to be solved – and soon. Thankfully, crypto has a solution. My latest Crypto Capital recommendation is a blockchain that's designed to thrive no matter what happens in the energy market. It aims to use low amounts of energy while remaining decentralized, fast, cheap, secure, and scalable. I can't discuss all the details here in fairness to my subscribers. But as energy prices continue to rise, more folks will turn to this blockchain for help. The energy market just got a lot more complicated. That's going to create major challenges during the coming energy supercycle... and big upside potential, too. Good investing, Eric Wade
Editor's note: Eric believes three major catalysts are at work today in the crypto sector. And as he recently explained in a sit-down conversation, it could lead to one of the biggest profit opportunities we'll ever see in our lifetimes. Investors who position themselves now could see 10X, 20X, or even 50X gains... Click here to learn more. Further Reading Cryptos might look intimidating at first glance. But "doing your homework" is just another part of investing. Not only that, but crypto's reputation as a "complicated" technology is partly why it offers the potential for life-changing gains... Read more here. Most folks think of bitcoin first when they hear about cryptos. But it's not the only crypto you should be watching right now. In fact, momentum is building behind another corner of this market that could see explosive gains... Learn more here. |
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