Electricity and cryptocurrency mining: An empirical contribution

Abstract

Active cryptocurrency mining and trading comes with heavy electricity demand and increased emissions. Thus, cryptocurrency mining is prohibited in most economies. Consequently, miners relocate to regions or economies without these prohibitions and/or with relatively lower electricity rates. As such, presenting a nexus between the cryptocurrency and electricity markets, even at the global level. This article investigates the different forms of relationships existing between these markets. The conditional asymmetric volatility model with the Wald, nonparametric and parametric Granger causality tests are employed. The results confirm the existence of both unidirectional and bidirectional lead-lag return relationships between the cryptocurrency and electricity markets. Cryptocurrency returns drive electricity demand. This finding is homogeneous both on a global and strata (homogeneous groupings) basis. Also, the electricity market spills over significant volatilities to the cryptocurrency markets without feedback, nonetheless. Result-based policies are recommended towards green finance, decarbonization, and emission mitigations through the demand for electricity by the cryptocurrency markets. They include the use of clean and renewable electricity sources and technologies for cryptocurrency market activities.

Keywords

• Q41
• L86
• G12
• C12