The crypto bear market may not be at its worst yet, but it has already wreaked havoc across the industry, from retail investors to bitcoin mining companies. The latter has had a strong impact with a clear indicator being energy consumption. Although the major cryptocurrency has seen some reprieve, up 16% in the past seven days to $21,395 at the time of writing, its network power consumption indicates a drop in usage.
Bear market weighs heavily on energy consumption
On his Digiconomist site, digital currency economist Alex de Vries noted that the estimated energy consumption in terawatt hours per year (TWh/year) for Bitcoin has remained at 204.5 year-to-date until to June 11. Since then, there has been a steady decline. , and as of June 24, the figure had reached 132.47 TWh/year.
While the drop shows how cold the crypto winter has been, this amount of energy currently consumed equals that of Argentina. The equivalent carbon footprint of 73.89 Mt CO2, on the other hand, is comparable to that of Colombia.
Bitcoin miners generally operate on a for-profit business model, but bear market periods often force them to operate with only enough to sustain day-to-day operations. However, according to de Vries, with Bitcoin prices plummeting to unsustainable levels, miners are struggling to keep their hungry machines running for as long as they want.
De Vries adds that miners who are kicked out by poor market conditions may find it difficult to dispose of their equipment, even on the second-hand market. The Dutch economist explained that this is the case because Bitcoin miners cannot be reshaped for a different use, adding that they are of no help when they are not profitable and can only be sold. for scrap.
Ethereum mining equipment is much more suitable for resale because it has powerful graphics cards. With the collapse of mining, these chips are flooding the secondary market. However, they also run a risk because they would have typically operated 24/7 before hitting the market a second time, de Vries explained.
Chinese state media warns Bitcoin will soon become worthless
The Chinese government has formed a certain opinion on Bitcoin and the broader crypto market, except for its natively developed digital yuan, e-CNY.
He has often campaigned against crypto, and more recently state media reported that the leading digital asset, Bitcoin, will fall to zero in value. This week, the South China Morning Post said the country’s new Economic Daily news agency warned readers to beware of the impending downfall and steer clear of adoption.
The newspaper explained that Bitcoin is simply “a string of numeric code” whose value comes from the sale and purchase of the token. The viability of such a token therefore relies on investor confidence. If that trust collapses or more countries denounce Bitcoin as illegal, the newspaper predicts that Bitcoin will revert to “its original value, which is absolutely worthless.”
Furthermore, China’s state-run newspaper has argued that the West is responsible for creating this highly leveraged (crypto) market, which it describes as riddled with “Concepts of manipulation and pseudo-technology.” This contributes to the characteristic volatility of Bitcoin.
China has implemented aggressive measures against Bitcoin and crypto. In 2018, it banned all non-local crypto exchanges from setting up in the country. Last year, it banned crypto mining ahead of a comprehensive crypto ban in September. Despite this, adoption of the digital yuan continues to grow and has increased by 1,800% over the past year.
To learn more about Bitcoin, visit our Investing in Bitcoin guide.