If Bitcoin hits $ 500,000, mining will produce more CO2 than Mexico or Brazil

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Now that the price of Bitcoin is rebounding from the lows of less than $ 30,000 at the end of June, the cryptocurrency champions are making even more mind-boggling predictions on where it is heading or they are replaying their old Brobdingnagian predictions. .

Fundstrat Global Advisors Tom Lee expects an increase to $ 100,000 by the end of this year. That’s more than double its price of $ 46,000 by mid-afternoon on August 13th. Billionaire Tim Draper, an early investor in Tesla, Twitter and Skype, is asking for $ 250,000 by the end of 2022. ARK Invest’s Cathie Wood and ARKs cryptocurrency analyst Yassine Elmandjra expects for Bitcoin to hit $ 500,000, although they have not put forward a timeline for this feat.

Perhaps the King of the Bulls is MicroStrategy CEO Michael Saylor, who has accumulated Bitcoin in his corporate treasury. Saylor believes the Bitcoin market cap is destined to explode from $ 870 billion today to $ 11 trillion, although he has not said how quickly it will reach those highs. In this scenario, each coin would earn $ 14 million.

These dedicated fans, however, fail to recognize a thunderstorm cloud that is clouding the future of Bitcoins. If Bitcoin launches as expected, its notorious carbon footprint will increase at the same time. The industry that now sends as much carbon skyward as the Greek nation will release several times as much, matching the emissions of much larger industrial nations. Simply put, unless Bitcoin goes green in the greatest possible way, its integrated economy ensures that as its price skyrockets, the tonnage of carbon dioxide it releases will also increase. For now, its fanatical wealth can only grow in tandem with the carbon impact of Bitcoins.

Bitcoin’s carbon footprint increases or decreases with its price

At its price of around $ 46,000 on August 13, annual Bitcoin mining revenue is around $ 16 billion, including transaction fees paid to miners. Right now, producers are making tons of money due to the confluence of two forces: the price of currencies quintuple in the past year and the crackdown in China which, so far, has decimated the half of world production, dramatically increasing profits for miners in the rest of the world.

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But let’s look at a few years. At the end of March 2024, the Bitcoin algorithm dictates that the number of new coins issued every 10 minutes will be halved, from 6.25 to 3.125. If the price of Bitcoins does not move, the industry will be much less profitable. Its champions predict exactly the opposite: a rise in prices that will more than make up for the drop in the number of coins miners earn each year. (By the way, this scenario has played out three times already.)

In the years to come, Bitcoin mining will become much more competitive and its profitability will follow the economic laws governing all competitive businesses: when the profits are huge, new rivals step in and bring those profits down to free market levels. The cost of making a Bitcoin will eventually reach the price of a Bitcoin, says Alex de Vries, a Dutch economist whose website Digiconomist tracks carbon emissions from Bitcoins. Of course, that cost includes a return on the miners’ capital that is decent enough to keep them in the game. Suppose the price of Bitcoin rises to $ 100,000 by Christmas 2024, the year it is halved. This doubling from current prices would roughly equate to a 50% drop in the number of coins awarded each year. The total size of the industry would increase by about 8%. Thus, miners would generate about 8% more CO2 than today. Bitcoin issuance is said to worsen moderately, even as developed countries rush to meet the goal of net zero emissions.

Of course, Bitcoin’s current environmental profile is already sowing dismay among supporters like Elon Musk. But Musk, Saylor, and other flag bearers should weigh the impact if Bitcoin hits a number as Wood predicts of $ 500,000. Suppose it peaks at the end of 2024, or even a few years later. The size of the industry would explode from $ 16 billion today to $ 86 billion. In economic terms, it would cost the world’s miners the same $ 86 billion, including their modest profit margin needed to keep them going, to earn those tens of billions in Bitcoin (again, adjusted for halving. in 2024).

De Vries estimates that 60% of all miners’ costs go to electricity over long periods of time, with the balance going for capital, maintenance, overhead and other expenses. They would therefore pay a total of $ 52 billion for electricity in three years or more (60% of their $ 86 billion in costs). According to de Vriess’ estimates, the average cost of electricity on the grid is $ 40 per megawatt hour (mwh). In total, the industry would pump 1.3 billion mWh of electricity per year ($ 52 billion spent on electricity at $ 40 per mWh). This is roughly nine times the 140 million mWh of electricity production that represented the peak production before the flight from China. De Vries estimates that the Bitcoin network now emits 475 grams of CO2 for every megawatt of power deployed. If this formula holds, Bitcoin at $ 500,000 would belch 617 million metric tons of carbon per year.

This volume exceeds the footprint of Australia by 56%, Brazil by 40%, South Africa by 40% and Mexico by 33%. Bitcoin mining would shed 70% more carbon dioxide per year than the UK’s 352 million metric tonnes. Its pollution levels would approach Germany at 696 million tonnes. The United States now emits 4,921 million tonnes per year. At a Bitcoin price of $ 500,000, global industry would be an incredible 12% of the CO2 that powers America’s great industrial engine, and heats and cools our 140 million homes.

Of course, there are many factors that could improve this dire picture. Bitcoin could make a big shift towards wind, solar and hydropower. Or the demand for electricity could become so great that miners simply won’t be able to find the extra capacity they seek to capitalize on the lavish prices. On the flip side, as America and other countries embrace renewables, more and more fossil fuel power plants will seek new customers. Today, Bitcoin miners are already restoring closed natural gas plants from New York to Kentucky, Texas. In Pennsylvania, entrepreneurs are even reviving the declining residual coal business. No, a green future for Bitcoin is not inevitable as current trends show.

For its fans, the surge in the price of Bitcoin is its birthright as an incorruptible currency, a safe store of value or a profitable place for businesses to park their excess cash. They are not talking about the environmental scourge that is an integral part of this fate.

This story was originally featured on Fortune.com

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