The (Un-)Sustainability of Bitcoin Investments

14 Pages Posted: 22 Apr 2019 Last revised: 15 Jun 2021

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Josua Oll

University of Oldenburg; Carl von Ossietzky University of Oldenburg

Date Written: April 4, 2019

Abstract

Climate-related criticism toward Bitcoin is primarily based on the network’s absolute carbon emissions without consideration of Bitcoin’s market value. Taking a relative emission perspective and utilizing the mean–variance portfolio optimization framework, we study the financial and carbon implications of Bitcoin investments. Our results show that adding Bitcoin to a diversified equity portfolio can enhance the risk–return relationship of the portfolio. Furthermore, we identify realistic scenarios for which the addition of Bitcoin to a diversified equity portfolio reduces the portfolio’s aggregate carbon emissions. This finding persists under various, conservative assumptions about Bitcoin prices, carbon emission estimates, and carbon prices.

Keywords: Cryptocurrencies; Bitcoin; Carbon emissions; Climate change; Carbon intensity; Mean–variance analysis

JEL Classification: G1, G11, Q54

Suggested Citation

Baur, Dirk G. and Oll, Josua, The (Un-)Sustainability of Bitcoin Investments (April 4, 2019). Available at SSRN: https://ssrn.com/abstract=3365820 or http://dx.doi.org/10.2139/ssrn.3365820

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Josua Oll

University of Oldenburg ( email )

Germany

Carl von Ossietzky University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, 26129
Germany

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