US companies moving into Venezuela to extract the country’s enormous crude oil reserves could lower electricity prices for Bitcoin miners and improve their profitability margins, analysts at crypto exchange Bitfinex said.
“Cheaper and more abundant energy would improve miner margins globally and could unlock a new phase of mining expansion, particularly in regions able to secure long-term power contracts,” the Bitfinex analysts said in a note on Monday.
The US started seizing Venezuelan oil tankers in December, and it is expected to start extracting Venezuela’s 303 billion barrels worth of crude oil reserves after capturing Venezuelan President Nicolás Maduro on Saturday.
Chevron is the only major US oil company currently operational in Venezuela, but US President Donald Trump is pushing for other big players to move into the country to start producing.
The intervention will have “immediate spillover effects” in the energy markets and second-order implications for Bitcoin (BTC) and the broader cryptocurrency market, the Bitfinex analysts said, while adding that only a fraction of Venezuela’s oil reserves would need to be tapped to meaningfully impact energy prices.
It could provide much-needed relief for Bitcoin miners, whose profitability has been squeezed by a 25% drop in Bitcoin from its all-time high, rising mining difficulty, and increasing electricity costs.
US may need a decade to make Venezuela a “production powerhouse”
However, “Any meaningful increase in Venezuelan output would take years, not months,” the Bitfinex analysts said, adding that the pace will hinge on how the US handles Venezuela’s political transition and sanctions that linger over the South American country.
It may even take a decade for the US to make the most of Venezuela’s oil reserves, Matt Mena, crypto research strategist at crypto asset manager 21Shares, said in a note:
“While the long-term potential is vast, analysts estimate it would require a decade and over $100 billion in infrastructure investment to restore the country to its former status as a production powerhouse.”
Venezuelan oil production has tanked over the decades
In the 1970s, Venezuela produced around 3.5 million barrels per day — representing roughly 7% of global crude output — but that figure has since fallen to around 1 million barrels per day and now only accounts for about 1% of global production.
The collapse in economic output has largely occurred under the country’s socialist regime, with the Venezuelan bolívar losing 99.99% of its purchasing power since Maduro took over in 2013, while human rights and political freedoms have been severely repressed.
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Crude oil prices fell following the US intervention, with the US benchmark dropping to roughly $58 per barrel, down 3% from December’s high of about $60 — a marginal relief for Bitcoin miners whose electricity costs rely on crude oil.
As for the broader crypto market, the Bitfinex analysts said prices are “likely to be driven less by energy fundamentals and more by shifts in macro risk appetite, volatility and cross-asset positioning.”
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