Bitcoin’s value has fallen enough to curb the cryptocurrency’s massive energy consumption † and associated greenhouse gas emissions – but only if prices stay low. The price of a single Bitcoin dropped below $24,000 today, about half of what it was worth in March. Although it has been steadily losing value for months, the sudden drop in value in the past 24 hours is pushing the price below a significant threshold when it comes to Bitcoin’s environmental impact.
Since the price of Bitcoin peaked at about $69,000 in November, the network’s annual electricity consumption has been estimated between about 180 and 200 terawatt hours (TWh). That’s about the same number electricity used by all data centers in the world every year.
Generally higher prices encourage more mining because the reward is greater. But prices don’t have to stay at that peak for Bitcoin to stay energy hungry. As long as the price remains above $25,200, the Bitcoin network can support mining activities that consume about 180 TWh annually, according to Research published last year by digital currency economist Alex de Vries.
Prices below that $25.2K threshold could encourage miners to pause their operations or mine less, as they don’t want to risk spending more money on electricity than they earn from mining new tokens.
“We’re getting to price levels where it’s getting more and more challenging [for miners]’ says deVries. “Where it not only limits their ability to grow, but even affects their daily activities.”
However, it is still too early to make any concrete predictions about whether Bitcoin’s price decline will ultimately be beneficial for the environment. Due to the skyrocketing prices last year, miners probably have some savings to keep for a while. “If this is just a day drop, nothing will change,” says de Vries. On the other hand, if prices don’t recover soon, miners could be faced with some tough decisions.
A sustained price of around $24K could shrink the Bitcoin network’s global energy consumption to about 170 TWh per year, de Vries said. That may sound like a step change, but it would mean a significant reduction in electricity consumption and associated greenhouse gas emissions. If you compare it with the annual energy consumption of de Vries estimated Bitcoin was responsible for much of 2022, it would be like abolishing the amount of electricity the country of Ireland used in a year.
Bitcoin mining is inherently energy inefficient. Miners verify transactions by racing to solve increasingly complex puzzles using specialized hardware and are rewarded with new tokens in return. The built-in energy inefficiency that comes with all that computing power is meant to keep anyone from intentionally messing up the ledger of transactions. It is also why Bitcoin has many people concerned about the greenhouse gas emissions that the cryptocurrency generates.
Bitcoin is the largest player in cryptocurrency, so the fluctuating prices are the most important for the environment. But it’s not alone. The second largest cryptocurrency network, Ethereum, uses the same kind of energy-intensive process to validate transactions on its blockchain and has seen its value in the same way dive recently. So de Vries thinks the potential energy savings – and the resulting reduction in emissions – could be equal greater when taking the falling prices of other energy-guzzling cryptocurrencies.