Power Trading Desk also trading Crypto?
power gurus on WSO, wondering what do you think about power trading desks also trading bitcoin. The volatility is similar and electricity usage could be an interesting "basis" to trade
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Makes no fucking sense
Shut the fuck up
Better off trading SP15-PJM West spreads..higher correlation, slightly less volatility
Already happening...all the merchants are keeping an eye on it. Lots of crypto shops former power guys.
Unironically, all these big crypto mining operations going in should trade power futures and crypto futures as some kind of a crack spread to lock in margin.
Truly, think we can get there but will take time. The first step is for them to understand if how actively they need to "hedge the power" that is happening the last 18 months. But lots of folks are waiting to see how batteries and further renewable growth impacts the space as you can imagine a lot of tech crypto dudes who are about changing the world ain't going to say lets build some fossil fuels so I can hedge my crypto.
I do not follow crypto futures myself so not sure how actively these guys even use tools yet. But hedging an input cost always easiest first step.
I'll take a counterpoint on this topic.
Having the SAME desk hedge power and crypto is nuts and is worse than a coal trader hedging RINs.
That being said...
Power folks hedge everything, if they are sophisticated enough and have an appetite for odd customer deals. I'll share some examples / experiences.
So crypto is no different. It takes X power over Y time to run the Antminers to receive Z Bitcoin (See Danskammer Plant in New York, or long-term power contracts from NYPA from Robert Moses). To STRUCTURE the deal is relatively easy (costless collar or 2 for 1 put/call ratio -- if BTC drops below 20,000 company puts power 2 for 1, etc.).
haha love it...crazy examples...but yes crazy stuff have been done. That said they would offset the other risk as you mentioned and deal with the power side ha.
Every college junior is now going to want to be a power structurer.
MD --
Every college junior SHOULD be a Commodity Structurer! They should only be so lucky!
Why is it insane to have the same power desk trade crypto and power? I imagine it's just 1 trader in the entire group doing this
For the same reason that there are natty traders, cattle traders, steel traders, etc.
You are an expert in your field and highly knowledgeable in all fields.
Trading crypto is a full-time job. In "smaller shops" where there is only one or two traders? Fine. But across an organization? Not likely. Could happen, but not likely
A heat rate or crack spread has direct correlation due an actual physical mechanism relating the two. Similar to the examples by DOUG you lack a direct correlation between power and crypto. The sole or major deciding factor on crypto prices is not just power price just like all those other whacky examples you have massive pair risk in that portfolio. You can infer or say power prices could signal a move in crypto or vice versa but anyone saying beyond that is kidding themselves.
there is a firm out there trying to locate bitcoin mining at wind farms. Problem is that you now have two volumetric risk problems, how much bitcoin will I mine and how much power will I produce...but someone is out there banging that drum and someone will get in line and march to that beat, just a matter of when.
Everything seems to be simple here. When you use conventional components when mining cryptocurrencies, then you spend more electricity. It is better to buy a mining machine, and then you will have a better chance of finding something, namely crypto. At the same time, the electricity that you will spend will not be used in vain.
I have Antminer E9 and have been mining for a long time. During all this time, I managed to find only Ethereum. This crypto is not as valuable as Bitcoin, but still, its value today is $4,142. In addition, the rate continues to grow. I think it's a great catch.
The first cypto CME contract was cleared by a power hedge fund.... not the norm but seeing it more and more
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