Trump's Crypto Endorsement: The Energy Crisis and Computing Power Enigma Behind Bitcoin's Price Surge

Trump's Crypto Endorsement: The Energy Crisis and Computing Power Enigma Behind Bitcoin's Price SurgeThis is the 104th article in the ESGProgressObservation series. Keywords: Cryptocurrency, Trump, Energy Consumption, Computing Power

Trump's Crypto Endorsement: The Energy Crisis and Computing Power Enigma Behind Bitcoin's Price Surge

This is the 104th article in the ESGProgressObservation series. Keywords: Cryptocurrency, Trump, Energy Consumption, Computing Power.

In November 2024, Bitcoin's price neared $100,000, a staggering near 80,000-fold increase from its 2011 price of 9 Chinese Yuan. This remarkable surge is closely tied to Trump's election victory. Trump pledged to incorporate the US government's Bitcoin holdings into national strategic reserves, never to be sold; to dismiss the current SEC chair and establish crypto-friendly regulations while simultaneously halting Central Bank Digital Currency (CBDC) development; and to strengthen support for US Bitcoin mining and related industries. These commitments provided strong political momentum for Bitcoin's price surge, making it a highly sought-after asset among major banks and tech giants, backed by the unwavering support of the US President.

However, Bitcoin's continuous price rise has brought a serious problem: a dramatic increase in energy consumption. Bitcoin mining demands enormous amounts of electricity; the higher the price, the more active the mining, and consequently, the greater the electricity consumption. This positive correlation poses a significant challenge to global climate issues, making Bitcoin mining a hidden "energy bomb" behind its high price.

Bitcoin Mining: The Truth About Energy Consumption

Why does higher Bitcoin price lead to greater electricity consumption in mining? This stems from Bitcoin's mining mechanism. The prevalent Bitcoin mining method involves using specialized "mining rigs" to participate in the Bitcoin network's cryptographic computations. Miners collectively perform hash computations on the transaction ledger. When a miner successfully calculates a hash value meeting the network's difficulty requirements, they receive a "block reward" and "transaction fees." Mining rigs have different energy efficiency ratios; the amount of electricity consumed to mine one Bitcoin varies accordingly.

Taking Bitmain's Antminer S21 as an example, mining one Bitcoin currently requires approximately 260 S21 miners running for a month, with each miner consuming about 2520 kilowatt-hours (kWh) per month. This totals 655,000 kWh enough to power thousands of households for a month.

However, the computing power of a single mining rig is insignificant within the vast Bitcoin network. Most miners join "mining pools" to increase their probability of receiving block rewards. Mining pools aggregate the computing power of numerous mining rigs, improving the chances of obtaining block rewards, but also increasing overall energy consumption.

Since China banned cryptocurrency mining in 2021, the US has become the largest Bitcoin mining country, accounting for approximately 38% of global Bitcoin mining activity. The Cambridge Bitcoin Electricity Consumption Index (CBECI) estimates that the global electricity consumption associated with Bitcoin mining in 2023 ranged from 67 TWh to 240 TWh, representing 0.2% to 0.9% of global electricity demand equivalent to the annual electricity consumption of Greece or Australia.

The Clean Energy Dilemma: The Shadow of Fossil Fuels

Despite the rapid development of clean energy in recent years, Bitcoin mining still heavily relies on fossil fuels. Studies show that nearly 50% of the energy used for Bitcoin mining comes from traditional fossil fuels. In some US states, cryptocurrency companies even acquire coal-fired power plants for mining, with the burning of waste coal the most polluting method releasing large amounts of sulfur dioxide, nitrogen oxides, and other pollutants.

Why do mining companies choose to develop in the US? This is due to the US's open attitude towards cryptocurrency, and its relatively cheap and stable electricity resources. Bitcoin mining farms have investment cycles exceeding four years, requiring a stable policy environment, energy supply, and low natural disaster risk. Trump's election victory might lead to relaxed environmental regulations and reduced oversight of fossil fuels, further stimulating Bitcoin mining activity and intensifying energy consumption. The arrival of Bitcoin's halving cycle will also double mining costs, further driving up energy consumption.

Cryptocurrency Expansion: The Looming Energy Crisis

The cryptocurrency market is currently experiencing a bull market, with a total market capitalization exceeding $3.45 trillion. Besides Bitcoin, there are over 9,000 other cryptocurrencies, many of which also use the Proof-of-Work (PoW) consensus mechanism, requiring significant electricity consumption for mining.

In Texas, for example, 10 mining companies consume 1800 megawatts of electricity annually, resulting in an annual increase of $1.8 billion in electricity costs for the state. In the US, the impact of cryptocurrency mining on energy consumption and the environment is raising growing concerns. The US Energy Information Administration (EIA) has launched an emergency investigation, requesting data from mining companies to assess their energy usage and environmental impact.

Computing Power and Energy: A Double-Edged Sword

Bitcoin believers attribute its value to energy consumption (computing power). Miners' investment in mining remains unwavering, and the continuing growth in computing power and mining difficulty reflects strong belief in Bitcoin's long-term value. However, this "computing power equals power" concept also leads to significant energy consumption and environmental problems.

It's worth noting that the other side of the coin is Artificial Intelligence (AI). Training and running large AI models also require massive energy consumption; for example, training GPT-4 consumed electricity equivalent to the annual consumption of tens of thousands of households. The expansion of both AI and cryptocurrency will put immense pressure on global energy supply and the environment.

Future Outlook: Is Computing Power Power or a Bubble?

Currently, whether computing power is power or a bubble remains inconclusive. From an ESG perspective, current computing power development has created serious pollution issues. The value of this "double-edged sword" requires long-term observation and research. Bitcoin's price volatility is mainly influenced by economic conditions, market sentiment, and high-leverage trading, rather than changes in miners' long-term demand. Miners' continued investment in mining reflects a strong belief in Bitcoin's long-term value. Regardless of Bitcoin or other "mineable coins," their energy consumption is substantial, requiring joint efforts from the industry and regulatory bodies to effectively control energy consumption and reduce environmental impact while developing the digital economy. Balancing technological innovation and environmental protection will be a major challenge for the global community in the future.