The world’s largest cryptocurrency is one of the biggest carbon emitting sectors is a fact known to all. But just how big, is a question that the Bank of America tries to answer in a note published on Wednesday.
According to the organization, the energy consumption of Bitcoin is comparable to that of major corporations like American Airlines, which flies over 200 million passengers a year. It even ties the entire US federal government that employs 2 million people.
Each $1 billion in inflows into Bitcoin uses the same amount of energy as 1.2 million cars, the report estimates. A single Bitcoin purchase of around $50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE cars.
Furthermore, the carbon footprint of Bitcoin is directly linked to the price. As the price goes up, so do the resulting emissions, because more crypto miners become involved. This makes the Bitcoin network become more complex to cope with the demand and prevent hacking.
This, in turn, requires more hash power, which drives up energy consumption:
“Given the relatively linear relationship between bitcoin prices and bitcoin energy use, it is perhaps no surprise that bitcoin’s estimated energy consumption has grown over 200% in the past two years.”
The bank says that Bitcoin now uses as much power as a small, developed country like Greece, which has a population of 10 million people. This, at a time where most companies and countries are focused on lowering their environmental impact.
Another key concern is that most has power comes from China, where the electricity costs are very low, and the government has encouraged Bitcoin mining.
What this means is that most Bitcoin mining is fueled by unsustainable fossil fuels, as nearly 60% of Chinese electrical generation is from coal fired power plants, and less than 20% coming from natural gas or renewables.
Bank of America stresses that besides the environmental impact, the social and governance risks associated with investing in Bitcoin should also not be underestimated.
Democratization and decentralization of money have value, the bank says, but negatives outweigh them. On top of that, the anonymity of the digital currency also aids in nefarious activities like money laundering.
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