A rising bitcoin price goes hand in hand with rising environmental impact, believes economist Alex de Vries.
Digiconomist founder Alex de Vries predicts that the cost of mining a Bitcoin will rise to the price of a Bitcoin in the long run. de Vries refers to economic theory, which says that competition will push profits down over time.
de Vries, whose website examines the consequences of digital trends from an economic perspective, is certain: In this scenario, competitive mining causes further environmental damage because more carbon dioxide is produced.
Moreover, the impact of a $500,000 bitcoin would compound the problem and lead to an environmental disaster.
But with others claiming that the majority of the BTC network is already powered by renewable energy - is this report just another FUD attempt to disrupt the Bitcoin rally?
Bitcoin recovers from FUD
Since bottoming out at $29,800 in mid-July, Bitcoin has rallied strongly. This is even more true for the past week as bulls hope to reach $50,000 - an important psychological price level.
With that, talk of crypto winter has all but disappeared, and the prospect of a $100,000 price by the end of the year seems a real possibility.
Indeed, Bitcoin's recent upward moves have triggered a wave of lofty price predictions. Including a bullish year-end target from on-chain analyst Willy Woo. All the way to Dan Held's extreme price prediction of $9.5 million per token at some point in the future.
However, if the bitcoin price approaches these sky-high levels, de Vries and others fear that the network's carbon footprint will reach catastrophic proportions.
The environmental cost of a booming BTC price.
It follows that the laws of supply and demand will drive up the price of BTC, increasing mining revenues and profitability as BTC becomes more scarce over time.
This, in turn, will attract more miners to join the network, increasing the difficulty of mining and, in the long run, making an already competitive venture even more competitive and thus less profitable.
According to de Vries' calculations, the dynamics associated with a bitcoin price of $500,000 would emit 617 million tonnes of CO2 per year - an amount that far exceeds most countries.
"This amount exceeds the footprint of Australia by 56%, Brazil by 40%, South Africa by 40% and Mexico by 33%. Bitcoin mining would emit 70% more carbon gases annually than the UK's 352 million tonnes."
As serious as this seems, de Vries' claims raise questions. For example, a 2019 study by CoinShares estimates that almost three-quarters of the Bitcoin network is powered by renewable energy.
If this is the case, it would largely refute de Vries' claims of a CO2 catastrophe.