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Bitcoin's Environmental Footprint: A Growing Concern for Investors and the Planet

Strategic Insights

— 2 min read

Bitcoin's carbon emissions are rivaling those of major corporations, with estimates suggesting that each $1 billion in inflows into bitcoin uses the same amount of energy as 1.2 million cars. The report by Bank of America highlights the immense environmental impact of bitcoin, which is on par with the energy consumption of a small developed country like Greece. As the price of bitcoin increases, so does its energy consumption, leading to a significant carbon footprint that is linked directly to the price.

Key Takeaways:

  • Bitcoin's energy consumption is comparable to that of major corporations like American Airlines, which flies over 200 million passengers a year, and even the entire US federal government, which employs 2 million people.
  • The energy consumption of bitcoin is directly linked to its price, with a single Bitcoin purchase at a price of ~$50,000 having a carbon footprint of 270 tons, the equivalent of 60 ICE cars.
  • Bitcoin's estimated energy consumption has grown over 200% in the past two years, highlighting a significant environmental impact.
  • Most hash power comes from China, where the government actively encourages bitcoin mining and where electricity costs are very low, with nearly 60% of Chinese electrical generation coming from coal-fired power plants.
  • The digital currencies proposed by central banks would not have the same negative impact on the environment as bitcoin.
  • Bitcoin's main reason for investing is its price appreciation, rather than inflation protection or diversification.
  • Bank of America's report highlights social and governance risks associated with investing in bitcoin, including anonymity that aids nefarious activities.
  • US Treasury Secretary Janet Yellen has expressed concerns over cryptocurrencies' use in criminal online activity, including money laundering.

Statistics:

  • Bitcoin's energy consumption is comparable to that of American Airlines, which flies over 200 million passengers a year.
  • The estimated energy consumption of bitcoin has grown over 200% in the past two years.
  • A single Bitcoin purchase at a price of ~$50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE cars.
  • The energy consumption of bitcoin is on par with that of the entire US federal government, which employs 2 million people.
  • Nearly 60% of Chinese electrical generation comes from coal-fired power plants, with less than 20% coming from natural gas or renewables.

Sources:

  • Business Insider's March 2021 article, "Bank of America says bitcoin uses more energy than American Airlines, and its carbon footprint is getting worse" (https://www.businessinsider.com/bitcoin-uses-more-energy-than-american-airlines-bank-of-america-2021-3)
  • Bank of America's report, referenced in Business Insider's article, discussing the environmental impact of bitcoin and its price appreciation (https://markets.businessinsider.com/news/stocks/bitcoin-price-today-inflation-hedge-portfolio-bank-of-america-price-2021-3-1030220549)

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