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Bitcoin energy consumption falls as price plunges

It is not a secret that Bitcoin is losing value, causing many sleepless nights for investors. However, something interesting is coming out of the loss in fortune; crypto energy use is dropping.

Bitcoin mining is energy-intensive, and many countries are worried about the impact on their electricity generation. With many mining “camps” springing up, some countries are already putting regulations in place to safeguard their energy supply. However, it seems nature is taking care of itself as bitcoin energy consumption has been dropping, thanks to a persistent dip.

Over a recent couple of weeks, bitcoin miners reduced their electricity consumption by a third, according to figures by Alex de Vries, a digital currency economist.

The high energy consumption by bitcoin miners is because the miners earn tokens by using an energy-intensive but inefficient process to validate transactions. The global bitcoin consumption compares to the total consumption of some nations.

The global annualized bitcoin energy consumption fell from about 204 TWh to 132 TWh per year between June 11th and June 23rd. However, this is still on the high side, as it is about the size of Argentina’s total annual consumption.

When bitcoin value appreciates, it spurs more bitcoin production as the boon encourages miners to do more mining. They ramp up production by getting more machines. Bitcoin peaked last November at around $69,000. Since then, annual electricity consumption has ranged between 180 and 200 TWh, the equivalent of all the electricity consumed by all the data centers in operation per year.

Since that peak, bitcoin had been declining in value, although the drop in energy consumption did not come swiftly. That was because the value was above a threshold. According to de Vries, a price of $25,200 can sustain mining operations worth about 180 TWh per year. This is because miners already own the machines and would like to use them as much as possible to earn some profit from making tokens.

However, bitcoin miners may lose money from mining below the threshold due to the cost of electricity. To reduce their losses, miners will stop operating older and less efficient machines that will likely lose money. This means less energy consumption.

Bitcoin has been trading below $24,000 since the middle of July, and miners have been cutting their losses. de Vries said, “We’re getting to price levels where it is becoming more challenging [for miners]. Where it’s not just limiting their options to grow further, but it’s actually going to be impacting their day-to-day operations.”

The same drop in electricity consumption is befalling other cryptos. For example, Ethereum has lost in value too this month, although it has been rallying in the last week. But its electricity consumption has reduced to half what it was in May.

Cryptos have been linked to climate change, especially when mined using energy from dirty sources. Even when they are powered by renewable energy, they are still criticized for competing with other energy users in the vicinity. In response, there have been efforts to clean up cryptos, with some blockchains designed to be less energy-intensive.

Written by HackerVibes

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