Impact of Bitcoin mining and crypto market determinants on Bitcoin-based energy consumption

Abstract

PurposeWhile Blockchain can serve us, Bitcoin threatens our survival. If Bitcoin is assumed to be a country, it will rank 38th globally for energy consumption. With 90.2 metric million tonnes of carbon dioxide, Bitcoin mining and trading has emerged as an environmental threat. The current study investigates how the trading-specific variables, the prices of Crypto Index and Ethereum, affect bitcoin-based energy consumption. Also, the role of mining-specific variables is analyzed.Design/methodology/approachThe study uses monthly data from various sources collected from December 2018 to January 2023. The authors used the Autoregressive Distributed Lag (ARDL) Model to determine the short- and long-term relationships between variables. This study uses the Theory of Green Marketing and the Theory of Cross Elasticity of Demand as a theoretical lens.FindingsThe findings show that escalating crypto market index and Ethereum prices with a one-month lag increases bitcoin-specific electricity consumption and carbon emissions. Green investors may shift to cryptocurrencies based on consensus other than of Proof-of-Work. Ethereum behaves like a substitute for Bitcoin, reflected by the long-term positive relationship between Bitcoin's energy consumption and Ethereum prices.Originality/valueThe study analyses how the crypto market index and Ethereum price affect bitcoin-based energy use. The relationships identified are substantiated by the literature to provide suggestions to green investors and policymakers to mitigate the harmful impact of Bitcoin's colossal energy consumption on the natural environment.

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“…2 Main implications of cryptocurrencies transactions on energy sector to create bitcoin is considered "primary fuel for the global network of money transmission" Hashemi Joo et al [24]. The paradox is that "while blockchain can serve us, Bitcoin threatens our survival" Sapra and Shaikh [39].…”

“…Cryptocurrency is a digital currency that is not issued by a central bank and is not based on users' trust in a certain financial entity, because it uses a decentralized ledger system (blockchain technology) and involves a mining process based on solving some hash problems by the computer. This specific Bitcoin mining process is similar to the process of gold extraction Bjerg [8]; Zimmer, [56]; Bibi, [9]; Sapra, N., and Shaikh [39] and investors' interest in this financial asset is reminiscent of the nineteenth century gold rush. The parallel between gold and cryptocurrencies is not limited only to the impact on the financial market, but also to the externalities generated on the labor market and the environment Maurushat and Halpin, [34]; Dennin, [13].…”

The Impact of Academic Publications over the Last Decade on Historical Bitcoin Prices Using Generative Models

“…Bitcoin was born along with blockchain technology and while blockchain is perceived as beneficial to many fields, Bitcoin is highly controversial [2][3][4]. The high carbon footprint and energy consumption required by mining processes have led many researchers to call it dirty [5][6][7]. It was estimated that Bitcoin mining is roughly responsible for 65.4 MtCO 2 yearly, which is comparable to Greece's emissions.…”

Environmental Impact of Cryptocurrency Mining: Sustainability Challenges and Solutions

“…This research gives ideas for investors who care about the environment and policymakers to lessen Bitcoin's impact on nature due to its huge energy use. It also highlights the need to explore other ways of managing cryptocurrencies that are less harmful to the environment than Bitcoin's current method (Sapra & Shaikh, 2023).…”