Bitcoin (BTC), the world’s most popular cryptocurrency, has the potential to be a major energy consumer in the future, but only if it reaches several million dollars, according to new estimates from Arcane Research.
Cryptocurrency research and analysis firm Arcane Research released a report on Monday estimating the development of Bitcoin’s energy usage towards 2040.
Written by Arcane Research analyst Jaran Mellerud, the report points out that Bitcoin’s future energy consumption varies greatly depending on Bitcoin’s future price along with factors such as transaction fees, electricity prices, and others.
If the price of BTC reaches $ 2 million in 17 years, Bitcoin could consume 894 Terawatt hours (TWh) per year, a 10-fold increase from today’s level, the report suggests. Despite the huge growth, that energy consumption would only represent 0.36% of global energy consumption estimated in 2040, up from Bitcoin’s current 0.05% share, the analyst estimated.
“Currently, based on their energy consumption of 88 TWh and an average energy price of $ 50 per MWh, Bitcoin miners spend about 50% of their income on energy,” Mellerud noted.
Bitcoin’s future energy consumption would be much lower in less bullish scenarios. The price of BTC is expected to reach $ 500,000 by 2040 for Bitcoin to consume 223 TWh per year. If Bitcoin trades at $ 100,000 over 17 years, mining BTC would only consume 45 TWh per year, the report notes.
The analyst then mentioned the significant impact of the Bitcoin halving, a four-year event involving a 50% reduction in the reward for miners’ blocks. According to the report, the price of BTC has to increase at a huge pace due to the halving, while the “mitigating effect” of the halving can be offset by the increase in transaction fees in the future. “Such an increase will only happen if there is significant demand for using Bitcoin as a payment system,” Mellerud wrote, adding:
“The price of Bitcoin depends on the market demand for Bitcoin as a store of value, while transaction fees are driven by the use of Bitcoin as a medium of exchange.”
Since a store of value and a medium of exchange constitute two of money’s most important functions, the report also suggests that Bitcoin’s power consumption will only reach a significant level if Bitcoin is successful as money.
Related: What happens when 21 million Bitcoins are fully mined? Expert answers
Since many BTC skeptics believe such a scenario is hardly possible, they shouldn’t worry about Bitcoin’s energy consumption, Mellerud suggested, stating:
“I have good news for those of you who want to see Bitcoin’s energy consumption decrease: you can relax in your armchair, because your wishes will be fulfilled if Bitcoin fails as a monetary system. And you believe that Bitcoin will fail, right? “
The Bitcoin mining industry suffered a steep decline in 2022 during the ongoing cryptocurrency winter, with many large cryptocurrency miners deciding to sell their BTC holdings to continue trading. Mining companies in the US have also come under pressure from regulators, with US lawmakers requesting energy consumption data from four major BTC mining companies.
Despite the increasingly bearish climate, many Bitcoin miners are still optimistic about the prospect of Bitcoin’s short and long-term prices. According to Edward Lu, Canaan’s senior vice president, the mining industry is a long-term “healthy and profitable business”.