The value of Bitcoin has plummeted in the past. The good news is that it can reduce enormous energy use and greenhouse gas emissions. But only if prices stay low.
On Monday, June 13, 2022, the price of one Bitcoin plunged below USD 24,000. About half of its value in March. This frustrates crypto players.
Although its value has continued to fall for months, the decline has brought the price below a key threshold for Bitcoin's impact on the environment.
Since Bitcoin price peaked around USD 69,000 in November 2021, annual grid consumption is estimated to be between 180 and 200 terawatt-hours (TWh). That figure is almost equal to the amount of electricity used by all the data centers in the world each year.
Because the rewards are greater, higher prices generally encourage more mining. As long as the price stays above USD 25,200, Bitcoin network mining operations will continue to use around 180 TWh every year. That's according to research published last year by digital currency economist Alex de Vries.
A price below the USD 25,200 threshold could prompt miners to pause operations or mine less. That's because they don't want to risk spending more money on electricity than they earn from mining new tokens.
“We are reaching an increasingly challenging price level [for miners],” de Vries told The Verge. "Which not only limits their options for further growth, but it will actually affect their day-to-day operations."
However, it is still too early to make predictions about whether the Bitcoin price drop will ultimately benefit the environment. Last year's sky-high prices mean that miners likely have some savings to cover them for a while.
"If it's just a one-day drop then nothing will change," de Vries said. On the other hand, if the price fails to recover quickly, miners could face some tough decisions ahead.
According to de Vries, a sustained price of around USD 24,000 could shrink the Bitcoin network's global energy use to around 170 TWh per year. It may sound like a small incremental change, but it will add up to a significant reduction in electricity use and associated greenhouse gas emissions.
Why Is Bitcoin Mining Criticized So Much?
Bitcoin mining has long been criticized for being energy inefficient. Miners verify transactions by competing to solve increasingly complex puzzles using special hardware and earn new tokens in return.
Bitcoin is the biggest player in cryptocurrency. So he had a big hand in the environmental crisis. But he's not alone. The second largest network, Ethereum, uses the same type of energy-intensive process to validate transactions on its blockchain and has also experienced a recent decline in value. (*)
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