Bitcoin (BTC), the world’s most valuable cryptocurrency, has the potential to be a significant consumer of energy in the future, but only if it reaches several million dollars, according to new estimates by Arcane Research.
On Monday, cryptocurrency analytics and research firm Arcane Research released a report estimating the evolution in Bitcoin’s energy use through 2040.
The report, produced by Arcane Research analyst Jaran Millrod, notes that the future energy consumption of Bitcoin varies greatly depending on the future price of Bitcoin along with factors such as transaction fees, electricity prices, among others.
If the price of BTC reaches $2 million in 17 years, Bitcoin could consume 894 terawatt-hours (TWh) annually, 10 times more than today’s level, the report notes. Despite the explosive growth, this energy consumption will make up only 0.36% of the estimated global energy consumption in 2040, up from Bitcoin’s 0.05% share today, the analyst estimated.
“Currently, based on their energy consumption of 88 TWh and an average energy price of $50 per megawatt-hour, Bitcoin miners spend about 50% of their income on energy,” Millero noted.
The future energy consumption of Bitcoin will be much lower in the least optimistic scenarios. BTC must reach $500,000 by 2040 for Bitcoin to consume 223 TWh annually. If Bitcoin traded at $100,000 in 17 years, BTC mining would only consume 45 TWh per year, the report notes.
Bitcoin energy consumption estimated 2022-2040. Source: Arcane Research
The analyst went on to mention the significant impact of the bitcoin halving, a quadrennial event that indicates a 50% drop in the miner’s block reward. According to the report, the price of BTC should rise at a massive pace due to the halving, while the “mitigating effect” of the halving could be offset by increased transaction fees in the future. “This increase will only occur if there is a significant demand for Bitcoin as a payment system,” wrote Mellerud, adding:
Bitcoin price is based on market demand for Bitcoin as a store of value, while transaction fees are paid using Bitcoin as a medium of exchange.
As a store of value and a medium of exchange that constitute two of the most important functions of money, the report also notes that Bitcoin’s energy consumption will only reach a significant level if Bitcoin succeeds as money.
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Since many BTC skeptics believe that such a scenario is almost possible, they should not worry about Bitcoin’s energy consumption, Mellerud hinted, stating:
“I have good news for those of you who would like to see Bitcoin drop in energy consumption: you can relax in your chair, because if Bitcoin fails as a monetary system, your desires will come true. And you think Bitcoin will fail, right?”
The bitcoin mining industry suffered a major downturn in 2022 amid the ongoing crypto winter, as many major crypto miners chose to sell their bitcoin holdings to continue operating. Miners in the US have also faced pressure from regulators, as US lawmakers have requested energy consumption data from four major BTC miners.
Despite the increasingly bearish climate, many bitcoin miners remain bullish on the short- and long-term outlook for bitcoin price. According to Edward Law, Canaan’s Senior Vice President, the mining industry is a “healthy and profitable business” in the long run.