Bitcoin (BTC), the world’s most valued cryptocurrency, has the potential to be a major energy consumer in the future, but only if its price reaches several million dollars, according to new estimates from Arcane Research.
The cryptocurrency research and analysis company Arcane Research published a report on Monday estimating the evolution of Bitcoin’s energy use towards 2040.
The report, written by Arcane Research analyst Jaran Mellerud, notes that the future energy consumption of Bitcoin differs greatly based on the future price of BTC along with factors such as transaction fees, electricity costs, and others.
If the price of BTC reaches $2 million in 17 years, the Bitcoin network could consume 894 Terawatt-hours (TWh) per year, a growth 10 times greater than the current level, the report suggests. Despite the huge growth, this energy consumption would only represent 0.36% of the estimated global energy consumption by 2040, which is an increase from Bitcoin’s current 0.05%, according to analyst estimates.
“Currently, based on their power consumption of 88 TWh and an average power price of $50 per MWh, Bitcoin miners spend about 50% of their income on power,” Mellerud noted.
The future energy consumption of Bitcoin would be much lower in less bullish scenarios. The price of BTC would have to reach $500,000 in 2040 for Bitcoin to consume 223 TWh per year. If Bitcoin trades at $100,000 in 17 years, BTC mining would consume just 45 TWh a year, the report notes.
The analyst later mentioned the significant impact of the Bitcoin halvings, a quadrennial event that involves a 50% reduction in the reward per mined block. According to the report, the price of BTC must rise at a tremendous rate due to the halving events, while the “mitigating effect” of these events may be offset by increased transaction fees in the future. “This increase will only occur if there is a significant demand to use Bitcoin as a payment system,” Mellerud wrote, adding:
“Bitcoin price is dependent on market demand for BTC as a store of value, while transaction fees are driven by the use of cryptocurrency as a medium of exchange.”
As being a store of value and medium of exchange they constitute two of the most important functions of money, the report also suggests that Bitcoin’s energy consumption will only reach a significant level if the cryptocurrency succeeds as money.
As many BTC skeptics believe such a scenario is hardly possible, they shouldn’t worry about power consumption, Mellerud hinted, stating:
“I have some good news for those who want Bitcoin’s energy consumption to go down: You can relax on your couch, because your wishes will come true if Bitcoin fails as a monetary system. And you think Bitcoin will fail, don’t you?”
The Bitcoin mining sector has seen a major downturn in 2022 amid the current cryptocurrency bear market, with many large miners choosing to sell their BTC holdings to continue trading. US mining companies have also faced pressure from regulators, with lawmakers requesting energy consumption data from four major BTC mining companies.
Despite the increasingly bearish environment, many Bitcoin miners remain optimistic about the short- and long-term price outlook for Bitcoin. According to Canaan Senior Vice President Edward Lu, the mining sector is a “healthy and profitable business” in the long run.
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