Recent predictions from Arcane Research suggest that Bitcoin could become a significant consumer of energy by 2040, especially if its price reaches several million dollars. The cryptocurrency research and analytics organization, in a paper released on Monday by Jaran Mellerud, an analyst at Arcane Research, outlines the potential trajectory of Bitcoin’s energy consumption.
According to the analysis, if the price of Bitcoin reaches $2 million in the next 17 years, its annual energy requirement would be 894 Terawatt-hours (TWh), a tenfold increase from the current level. However, even with this substantial rise, Bitcoin’s energy consumption would only constitute 0.36% of the projected global energy consumption in 2040, up from its current 0.05%, as per the expert’s findings.
Mellerud highlighted that at present, Bitcoin miners allocate around 50% of their revenue to energy costs, considering their current energy usage of 88 TWh and an average energy price of $50 per Megawatt-hour (MWh).
In less optimistic scenarios, the analysis indicates that if Bitcoin trades at $100,000 in 17 years, annual energy usage for BTC mining would be 45 TWh. For Bitcoin’s energy consumption to reach 223 TWh annually, its price would need to reach $500,000 by 2040.
The paper underscores the significant impact of the Bitcoin halving, a process that occurs every four years, leading to a 50% reduction in miners’ block rewards. Mellerud suggests that the mitigating effect of the halving can be offset in the future by increased transaction fees, provided there is sufficient demand for adopting Bitcoin as a payment mechanism.
The report emphasizes that Bitcoin’s energy consumption will only become truly significant if Bitcoin succeeds as a form of money, given that being a store of value and a medium of exchange are fundamental functions of money. Despite the challenges, many Bitcoin miners remain optimistic about both the short-term and long-term prospects of Bitcoin’s price, with the mining sector viewed as a robust and prosperous industry.
In conclusion, Arcane Research’s recent analysis sheds light on the potential future trajectory of Bitcoin’s energy consumption, contingent upon its price reaching several million dollars by 2040. The forecasted scenarios, ranging from a substantial increase to more conservative estimates, underline the intricate relationship between Bitcoin’s value, transaction fees, and the evolving landscape of global energy consumption.
While the prospect of Bitcoin becoming a significant energy consumer is acknowledged, particularly in more optimistic scenarios, the analysis suggests that even under these circumstances, the cryptocurrency’s impact on global energy demand would remain relatively modest. The significance of the Bitcoin halving and its potential mitigating effect through increased transaction fees is emphasized, contingent upon sustained demand for Bitcoin as a payment mechanism.
The paper highlights the critical interplay between Bitcoin’s role as a store of value and a medium of exchange, asserting that its energy consumption will only become truly significant if it successfully establishes itself as a form of money. Despite the challenges and the evolving regulatory environment, the optimism of many Bitcoin miners regarding the cryptocurrency’s immediate and long-term prospects is noted, with the mining sector being portrayed as a robust and prosperous industry. As the cryptocurrency landscape continues to evolve, monitoring Bitcoin’s energy dynamics will remain a crucial aspect of understanding its broader impact on the global economy and energy infrastructure.