Bitcoin mining is a notoriously energy-intensive endeavor. As a result, pro-renewable energy politicians and regulators frequently criticize bitcoin miners for their heavy carbon footprints.
Recent data from the University of Cambridge’s Bitcoin Electricity Consumption Index indicates the power consumed to mine blocks recently hit an all-time high. Perhaps that’s a symptom of the cryptocurrency’s 2023 rebound, but the point is that miners need to reduce their carbon footprints and increase consumption of green energy.
Some are already doing that, and if the industry proves it’s making material progress on reducing its dependence on fossil fuels, exchange traded funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO) could benefit.
SATO, which turns two years old in October, holds 37 stocks — a slew of which are classified as crypto miners. Already under siege from policymakers to reduce emissions and embrace renewables, bitcoin miners, including SATO components, don’t need to be compelled to go green. After all, some experts believe high energy costs were part of the problem for the sector last year.
“Miners aren’t out of the woods just yet. Inflated power costs will remain a stubborn thorn in the industry’s side, and could quickly worsen if governments succeed in saddling miners with an added energy tax,” according to a recent report from Coin Metrics. “Even with the latest rally in Bitcoin price, daily revenue for the S19 has barely cracked $7, making every penny count. Without a sustained uptrend, mining margins may soon revisit the cold depths of winter 2022, when the average S19 briefly operated at a loss of more than $1.22 per day.”
The good news for some SATO member firms is data, as measured by bitcoin mining emissions intensity, indicates miners are making strong headway on reducing carbon emissions.
As Beincrypto.com reports, venture capitalist Daniel Batten recently noted bitcoin mining’s dependence on fossil fuels has declined by more than 6% a year since the start of 2020.
“As reported by BeInCrypto in late March, Bitcoin mining is now greener than electric vehicle technology. Hydroelectric energy is Bitcoin’s major power source, according to Batten,” reported the publication. “According to Cambridge University, the BTC network currently consumes around 140 TWh per year. However, this is still less than the 206 TWh per year lost in the U.S. due to transmission and distribution.”
SATO components have good reason to trim emissions in an effort to placate regulators, but there’s more benefit in that strategy. By delivering from fossil fuels, miners can potentially lower costs, boost profits and support sustainability credentials.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.