There’s considerable debate regarding bitcoin’s sustainability resume, and much of that consternation is attributable to the mining process, which is quite energy intensive.
As a result, there’s significant criticism of bitcoin miners as environmental offenders. However, that conversation is evolving in favor of crypto miners, and that could include exchange traded funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO).
SATO benchmarks to the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index and is home to multiple bitcoin miners, and that, in the eyes of some experts, may give the fund more environmental, social, and governance (ESG) credentials than it’s currently being given credit for.
“Bitcoin mining soaks up the excess supply of unpredictable energy that these probabilistic systems produce, smoothing demand curves and making these ‘zero carbon’ green energy products financially viable,” wrote Mickey Koss for Bitcoin Magazine.
In other words, a case can be made that the bitcoin mining industry is contributing to increased adoption of renewable energy and smoothing out some of the volatility associated with the reliability of those power sources.
But wait — there’s more. Bitcoin mining servers offer another benefit: They can actually damp rising energy costs for ordinary customers, which further bolsters SATO’s ESG chops.
“It also prevents or slows rising energy costs for consumers. Every watt produced by additional sources of energy (like at-home solar panels) at best means lost revenue for the utility company, if not outright losses if the large solar panel farms produce enough energy,” added Koss.
Another point in favor of bitcoin miners in the sustainability conversation is that as more power sources come online, utilities may have to deal with supply that outstrips demand. As that happens, electric utilities are forced to incur costs associated with that excess supply, and those costs can be passed onto consumers. Bitcoin mining can contribute to improving that scenario.
“Bitcoin fixes this too. It can help soak up excess supply from producers, allowing utility companies to slow the rate of electricity price inflation,” concluded Koss. “Bitcoin incentives clean, abundant, and cheap energy for everyone. Green energy incentivizes strip mining and coal production. Bitcoin is ESG.”
Roughly a dozen of SATO’s 43 member firms are bitcoin miners, underscoring the ETF’s leverage to the industry’s improving energy profile.
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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.