The world is paying increasingly close attention to cryptocurrencies’ impact on the environment. Can digital currencies become more sustainable, or will a lack of green credentials be crypto’s downfall?
Cryptocurrency is nothing if not controversial. Some people live for it, others are wary of crypto, and most don’t understand it.
Since their inception, at best cryptocurrencies have been treated with trepidation by institutional investors; at worst they’ve been dubbed a scam. The narrative started to shift in 2017, when the value of Bitcoin, considered the first and most well-known cryptocurrency, soared beyond US$10,000 for the first time, from less than US$1,000 a year before.
With the market capitalisation of all cryptocurrencies reaching US$2 trillion in April this year, and one Bitcoin worth over US$30,000 today, most now agree that, like it or not, crypto is here to stay.
“I wouldn’t be surprised if by the end of the decade we have a 5 or 10 trillion market cap for cryptocurrencies, instead of the current one and a half,” says Aleksey Mironenko, managing director of Capital Company, a Hong Kong-based independent asset management firm. His firm started investing in cryptocurrencies less than a year ago.
VOLATILITY
Created to be a decentralised, secure and anonymous alternative currency, cryptocurrencies are independent of governments, banks or any monetary authority. This also means they are subject to extreme volatility.
Many factors can immediately and significantly impact the value of a cryptocurrency—even a tweet.
Elon Musk, who tweets regularly about his love-hate relationship with crypto, announced last month that Tesla would stop accepting Bitcoin as a payment method, less than two months after it started, because of the environmental impact of cryptocurrency. His announcement caused an immediate dip in the value of Bitcoin, one among many, but also, perhaps more significantly, drew media and public attention towards cryptocurrency’s cost to the environment.