Energy markets to face disruptions amid unregulated crypto mining

By Trend

Energy markets will face disruptions amid unregulated crypto mining, Trend reports with reference to Fitch Ratings.

The agency notes that rapid growth in unregulated crypto mining could divert resources from the electrification of other sectors, particularly in emerging markets.

From 2017 until now, Bitcoin energy consumption has increased by over 1300 percent. According to Bitcoin statistics provided by Digiconomist through their Bitcoin Energy Consumption Index, the lowest annual terawatt hour values (tWh) for Bitcoin's energy use were at just over 3 TWh per year at the start of 2017. By mid-April 2021, that number had grown to more than 50 TWh of annual Bitcoin energy usage worldwide.

Despite the volatility and recent slumping price, many experts still say Bitcoin is on its way to passing the $100,000 mark, though with varying opinions on exactly when that will happen. And a recent study by Deutsche Bank found that about a quarter of Bitcoin investors believe Bitcoin prices will be over $110,000 in five years.

“The increase in global demand for cryptocurrencies in 2021 and highly profitable crypto mining have created ecosystems that already consume an estimated 0.4–1 percent of global electricity. However, a greater level of crypto market regulatory oversight, including mining methods and related energy consumption, is likely in most jurisdictions in the longer term, limiting risks to energy utilities,” says the agency.

Fitch Ratings notes that unchecked growth of unregulated cryptocurrencies’ energy demand may disrupt the power sector, as the lack of transparency challenges investment planning in energy generation and networks.

“However, this scenario of prolonged unrestricted expansion is unlikely as regulators are increasing their focus on cryptocurrencies, first and foremost due to their potential impact on financial markets’ stability and their use in illicit activities, but also due to the impact on energy markets and the resulting environmental and social implications. Some countries, such as China, have chosen to ban cryptocurrencies’ mining and trading. Russia has been discussing similar proposals. Many others plan to implement expansive regulatory frameworks to manage digital assets, including standards, supervision and disclosure requirements,” the report reads.