Bitcoin: Addressing mining ESG issues could dramatically increase investor interest, report

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Bitcoin’s ESG issues, particularly those around the type of energy used in its mining process, could “dramatically increase” the cryptocurrency’s attractiveness to professional investors if they are addressed by the market, according to new research.


In a report, Nickel Digital Asset Management said 27% of wealth managers and institutional investors surveyed would invest in Bitcoin for the first time if there were funds and investment vehicles that addressed the ESG issue around mining, while 64% said they would increase their allocation in the same circumstances.


READ: Bitcoin bounces as Musk says Tesla likely to start reaccepting payments


Nickel also flagged that in most cases institutional investors in Bitcoin and other digital currencies currently had only “very low levels of exposure” and many were “just testing the market”.


“Mining Bitcoin is an energy-intensive process because of the Proof-of-Work consensus mechanism, which defines the core security layer of Bitcoin protocol and plays a critical role in securing nearly a trillion dollar worth of digital assets. It is a conservative mechanism and is unlikely to be altered in the near future. It is important, therefore, to focus on the energy mix deployed in Bitcoin mining (the percentage of renewable vs. fossil fuel) rather than an absolute amount of energy used”, Nickel’s co-founder and chief executive Anatoly Crachilov said in a statement.


“According to a report published Cambridge Centre for Alternative Finance last year, as much as 76% of miners used at least some share of renewables in their energy mix, while as much as 39% used exclusively green energy sources. These figures are set to improve further as miners are constantly searching for the cheapest form of electricity – their main cost item – which increasingly comes from renewables. Furthermore, the recent exodus of many bitcoin miners from China into new jurisdictions, for example the USA and Canada, should further accelerate the adoption of renewable energy sources, taking the share of renewables above 50% and beyond”, Crachilov added.


The issue of Bitcoin mining’s energy usage was back in the headlines this week after Tesla Inc (NASDAQ:TSLA) boss Elon Musk said the electric car maker will likely start reaccepting payments using the digital currency after it completed due diligence on the amount of renewable energy currently being used to mine the cryptocurrency.


In mid-afternoon trading on Friday, Bitcoin was up 1.5% in the last 24 hours at US$32,416, giving it a market cap of US$608bn.

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