During my previous article, I explored the profound impact of the Fourth Industrial Revolution, driven by emerging technologies, on the escalating demand for electricity. One notable player recognizing this surge is Microsoft, which is actively exploring the potential of uranium and nuclear power to meet the ever-growing energy requirements of its advancing AI developments. As the tech giant strategically aligns itself with nuclear solutions, it becomes increasingly clear that uranium is poised to play a pivotal role in sustaining the power-hungry landscape of the Fourth Industrial Revolution.
This observation immediately caught my attention, prompting me to ponder the chart above. Notably, both Uranium and Bitcoin have demonstrated a remarkable upward trajectory in the past decade. What's intriguing is that these two assets share two crucial features: they are finite resources and intricately linked to electricity. While Bitcoin relies on electricity for its generation, Uranium plays a pivotal role in nuclear energy production—a process that not only generates electricity but does so in a more cost-effective and environmentally cleaner manner.
We are currently witnessing the dawn of a new era in the global economic and technological order. Over the past three decades, massive investment themes centered around the bond bubble, US stocks, and financial assets. However, the next decade promises a significant departure from this norm. The once-dominant trends of Western-led globalization and financialization are giving way to Western de-globalization, with the East taking the lead in globalizing efforts. Concurrently, we're witnessing the ascent of the global south and the decentralization of the global economy. Within this evolving macro environment, one commodity is poised for a substantial boom: Uranium.
Courtesy: Kathleen Tyson Twitter
As seen in the correlation above, high electricity usage strongly correlates with a country's income. As economies in the global south continue to prosper, there is a natural aspiration among the population for an enhanced quality of life akin to their Western counterparts. This translates into a growing demand for cars, motorbikes, vacations, and larger homes, all of which contribute to an inevitable surge in energy consumption. The key question then becomes: how can these nations meet the escalating energy needs of their burgeoning populations in a cost-effective manner?
If the recent Russian invasion of Ukraine has taught us anything, it is that energy cannot be taken for granted. The European Union, notably Germany, was highly dependent on Russian gas for its heavy manufacturing sector and overall economy. However, with the outbreak of war and ensuing sanctions, Germany and the EU learned a hard lesson about the perils of not building their own energy infrastructure and relying solely on external sources, particularly Putin's Russia. This overdependence has resulted in a decline in Germany's industrial capability and a noticeable slowdown in the European economy. It is not just developed markets that are reassessing their relations with Moscow; countries in the global south are also witnessing an improvement in their citizens' standard of living, leading to an inevitable increase in energy consumption. For many of these nations, investing in nuclear energy becomes a viable path to afford a high standard of living for their populations. Notably, Russia's state-owned nuclear energy company ROSATOM is already involved in projects in Bangladesh, Egypt, China, Hungary, India, and Turkey, showcasing the global shift towards nuclear solutions.
China and Russia currently hold a significant stronghold on the global nuclear power landscape, collectively accounting for 70% of new nuclear power plants. Interestingly, following China, India stands as the second-largest contributor to the nuclear buildout. Moreover, the nuclear supply chain is firmly under the control of Eastern nations, with Russia leading the charge, responsible for over half of global uranium enrichment. Notably, even after sanctions on Russia, the U.S. continues to import half of its enriched uranium from Russia. China, on the other hand, has solidified its position as the global leader in nuclear technology. This dominance not only positions these countries as major players in the nuclear arena but also grants them significant bargaining power, particularly when engaging with the global south. China, for instance, can extend its influence to Belt and Road Initiative (BRI) nations, offering nuclear capabilities in exchange for natural resources and affordable energy. Similarly, nations like Turkey and India find themselves cautious about imposing sanctions on Russia, as they heavily rely on Russia for inexpensive energy, which can be procured in local currencies.
The nuclear trade is undergoing a significant transformation away from being dollarized as the East solidifies its dominance in the nuclear supply chain. Trading, now and in the foreseeable future, is increasingly taking place outside the realm of the Dollar. While the nuclear trade has been denominated in dollars from 1971 to 2022, the emerging trend points toward a shift to commodities. In this evolving landscape, Bitcoin enters as a noteworthy player, offering an alternative to traditional currencies. As the East holds sway over the nuclear market, the potential for non-dollarized transactions gains momentum, and Bitcoin stands at the forefront of this financial evolution.
Bitcoin, a finite digital peer-to-peer currency created through the process of Bitcoin mining, operates on the backbone of electricity. As an increasing number of countries seek neutral reserve assets, whether in the form of gold or Bitcoin, and populations turn to assets as a hedge against inflation, the future holds the promise of heightened Bitcoin mining activities. This surge in mining directly translates to an increased demand for electricity. Consequently, investing in Bitcoin is not only a bet on its long-term potential but also an indirect investment in uranium. The parallel rise of both commodities can be attributed to the shared need for electricity, showcasing the intricate connection between the digital currency market and the energy-intensive world of uranium.
Bitcoin mining, mirroring the energy demands of AI and other emerging technologies, is on the brink of requiring a substantial amount of electricity. Concurrently, as countries in the global south endeavor to uplift their living standards, the demand for energy is primed to soar. In this unfolding narrative, nuclear energy emerges as the most pragmatic and efficient solution. For these compelling reasons, the uranium bull run is in its early stages, with nuclear power positioned as the predominant player in addressing the escalating energy needs of our swiftly advancing global landscape. Investing in uranium aligns with three major global trends: the ascent of Bitcoin, the rising living standards in the global south, and the unfolding Fourth Industrial Revolution. The present moment marks the opportune time to step onto the early phase of this monumental bull run!
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