Bitcoin crash scenario 'death spiral' hopes and experts to delay climate change

In response to fast-paced inflation, the

Federal Reserve Board (FRB) , the central bank of the United States, and the European Central Bank (ECB) of the EU have announced a series of rate hikes ( rate hikes ), and the economy will cool. The virtual currency market has continued to fluctuate significantly since the beginning of 2022, as Bitcoin hit a new low this year due to concerns. Experts are positive about the long-term impact of the 'death spiral' on climate change, where the depreciation of cryptocurrencies will stop mining and the cryptocurrencies will be tossed and prices will fall further.

Cryptocurrency price collapse offers hope for slowing climate change – here's how

According to Peter Howson, who teaches human geography and international development at Northumbria University in the United Kingdom, there are multiple factors behind Bitcoin and Ethereum's drop to one-third of their peak prices. That. Specifically, there are interest rate hikes in Western countries, a prolonged pandemic, Russia's invasion of Ukraine, and the collapse of the virtual currency 'Terra (LUNA)' that should have been pegged with the dollar.

What happened to the virtual currency 'Terra (LUNA)' whose price dropped by 99.99% --GIGAZINE

Hawthorne believes that if the cryptocurrency market is sluggish for a long time, Bitcoin prices may plummet towards zero. The reason is that when the price of Bitcoin goes down, the profits of miners will decrease, and finally the value of the virtual currency obtained by mining will reach a turning point where the value of mining will be lower than the cost of mining.

When mining becomes unprofitable, miners will withdraw from the cryptocurrency business. At that time, in order to sell the virtual currency that was held, the virtual currency that had been falling from the original will fall further, which will further accelerate the withdrawal of the mining company. In this way, the phenomenon that the decline of virtual currency and the withdrawal of mining companies occur in a chain like domino effect is called 'death spiral' in the virtual currency industry.

In the past, the value of Bitcoin has fallen below the cost of mining several times, but it has had no long-term impact on hash rates . However, large investors who have a large amount of Bitcoin, especially those who have bought Bitcoin at a high price, have losses, so if the market continues to be sluggish, it is possible to let go of Bitcoin. It will increase and the risk of a plunge will also increase.

The depreciation of cryptocurrencies is a headache for investors and people in areas like El Salvador, where Bitcoin is the fiat currency, but Hawthorne said, 'Cryptocurrency losses may be beneficial to the climate.' I think. This is because virtual currencies such as Bitcoin use a method called Proof of Work (POW) .

At POW, mining-only devices around the world are competing to calculate cryptography, consuming more power than another typical method, Proof of Stake (POS) . For example, the Bitcoin network consumes 118.47 terawatt hours of electricity in a year, which exceeds the power consumption of all refrigerators in the United States.

Some of the major miners claim to be mining with renewable energy, but the specific number of miners using renewable energy depends on the statistics. A survey conducted by the Bitcoin Mining Council, an industry group organized by Bitcoin miners, in 2022 of about half of all miners found that 'the amount of renewable energy used, including nuclear power, is total. 58% 'was reported. Meanwhile, researchers at the Free University of Amsterdam, the Netherlands, said in a research report released in March 2022, 'Only 25% of Bitcoin miners use renewable energy, 60. More than% rely on coal and natural gas. '

In this regard, Hawthorne said, 'The higher the price of cryptocurrencies, the more electricity will be consumed until the cost of winning the mining competition exceeds the profit. Conversely, if the price of Bitcoin goes down, The economic incentive to waste energy for bitcoin mining should be low, which is theoretically good for climate change. '

in Note, Posted by log1l_ks