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Cryptocurrencies have become an increasingly popular investment asset in the United States over the past decade.
At the same time, US investors have begun to favor environmental, social and governance (ESG) strategies to limit their exposure to assets that may harm the environment.
A new Forbes Advisor survey reveals that despite an expressed interest in ESG investing, many Americans familiar with crypto do not understand its potentially negative environmental consequences, especially Bitcoin (BTC).
According to the Cambridge Center for Alternative Finance, Bitcoin currently consumes electricity at an annualized rate of 127 terawatt hours (TWh). This exceeds Norway’s total annual electricity consumption.
Here’s a look at how Americans view cryptocurrency investing and its impact on the environment.
Americans don’t understand Bitcoin’s environmental impact
We asked a panel of 2,000 Americans familiar with cryptocurrency what impact Bitcoin has on the environment and climate change. A total of 58% said it had no or slight environmental impact.
- About 32% say they believe Bitcoin has no impact on the environment.
- Another 26% responded that they thought BTC was “good for the environment.”
- Only 6% say Bitcoin is a significant environmental threat.
But here’s the catch. Bitcoin consumes a huge amount of electricity, making it a major source of carbon emissions.
US Bitcoin miners generated 0.85 pounds of carbon dioxide per kilowatt-hour of energy used in 2020. Bitcoin mining is estimated to produce 40 billion tons of carbon dioxide, and the US accounts for more than 37% of the total global Bitcoin mining capacity.
One estimate suggests that each Bitcoin buy or sell transaction generates half a ton of CO2.
To make matters worse, the carbon emissions required to mine a bitcoin doubles approximately every four years – each time bitcoin performs a “halving”, which halves the rewards issued for mining bitcoin. cryptocurrency.
Joe Sweeney, managing partner at Cornerstone Wealth, says Bitcoin is an issue for any investor concerned about ESG principles.
“With such a focus on ESG investing, bitcoin mining has never been good from an energy consumption perspective. Of course, it’s worse today given the constraints of supplies due to the Russian-Ukrainian war,” says Sweeney.
Most Americans Want Environmentally Friendly Investments
Our survey found that Americans might rethink their Bitcoin investments if they fully understood its massive carbon footprint.
When asked if they would consider investing elsewhere if they discovered that a cryptocurrency had a significant negative impact on the environment, 65% of investors said yes.
Unfortunately, younger Americans seem to be the least informed about Bitcoin’s carbon footprint:
- 67% of respondents aged 18-25 (Gen Z) and 71% of investors aged 26-41 (Gen Y) say they would consider alternatives to cryptocurrencies that harm the environment.
- 41% of respondents aged 18-25 think Bitcoin has no impact on the environment, while 18% said BTC is good for the environment.
- 35% of respondents aged 26-41 say they believe Bitcoin has no impact on the environment, and 26% say BTC is good for the environment.
- Half of respondents aged 77 and over – the silent generation – think bitcoin has no impact on the environment, with 18% saying it is good for the environment.
The survey also reveals that Americans are serious about their ESG priorities for equities.
About 58% of respondents who own some form of investment assets say they would avoid stocks because of their impact on the environment, including 68% of Gen Z investors and 63% of Gen Z investors. Y.
In the first 11 months of 2021, ESG-focused funds saw record inflows of $649 billion, more than double the $285 billion in ESG fund inflows during the same period in 2019 .
Armando Senra, head of iShares Americas at BlackRock, recently predicted that global ESG investing could reach $1 trillion by 2030.
But US investors don’t seem to be bundling cryptocurrencies with big energy stocks like ExxonMobil (XOM) and Chevron Corp. (CVX) or automakers heavily dependent on fossil fuels like Ford Motor Co. (F) and General Motors (GM).
Owen Murray, chief investment officer for Horizon Wealth Advisors, said the high degree of speculation in the crypto market suggests that many Americans who own crypto don’t think too much about Bitcoin’s impact on the world.
“My impression is that most crypto investors don’t really know or care about the environmental impact,” Murray says.
Our survey also revealed that 44% of respondents were more concerned about the potential return of a crypto investment than its environmental impact.
- Nearly 58% of respondents aged 58-76 – baby boomers – said potential return on investment was the most important factor when deciding whether to invest in a particular crypto, with only 5% of this cohort citing the environmental impact of crypto as a concern.
- Cost and potential return on investment were top concerns for Gen Z respondents aged 18-25, with only 11% citing environmental concerns.
Solutions to Bitcoin’s energy problem
One possible solution to Bitcoin’s energy problem is to mine the cryptocurrency using renewable energy. But crypto mining has increased its carbon footprint since China cracked down on cryptocurrency mining last year, with miners fleeing to the United States and Kazakhstan.
Forced out of China, where hydroelectric power is abundant, the percentage of global energy used to mine Bitcoin from renewable sources has fallen from 40% in 2020 to around 25% in August 2021.
Additionally, with the ban on crypto mining in Beijing, miners have taken their jobs underground. According to a May report published by the Cambridge Center for Alternative Finance, the country still accounts for more than 21% of the Bitcoin mining market despite China’s ban. The United States retains its No. 1 position as the largest mining center.
“The fact that cryptos are created by torturing computers with unnecessary labor to mine the coins is just further proof of the absurdity of the whole cryptocurrency complex,” Murray says.
But some cryptographic solutions lurk.
Bitcoin’s biggest rival, Ethereum, is currently implementing a solution to its energy problem by switching to a proof-of-stake consensus mechanism from a proof-of-work method.
Ethereum estimates that its power consumption will decrease by 99.95% once it completes “the final chapter of proof of work on Ethereum,” which is expected to be completed later this summer, likely in August.
This online survey of 2,000 US adults was commissioned by Forbes Advisor and conducted by market research firm OnePoll in accordance with the Market Research Society’s Code of Conduct. Data was collected between May 13 and May 17, 2022. Margin of error is +/- 2.2 points with 95% confidence.
This survey was overseen by the OnePoll Research Team, Member of MRS and Corporate Member of the American Association for Public Opinion Research (AAPOR). For full survey methodology, including geographic and demographic sample sizes, contact [email protected]