The (Un-)Sustainability of Bitcoin Investments
14 Pages Posted: 22 Apr 2019 Last revised: 15 Jun 2021
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: Suggested Citation