26 Apr 2021

Cryptocurrency Consumes a Lot of Energy

Global Insights
Contributor(s): Citi Global Insights
As highlighted by Citi’s commodities strategist Aakash Doshi in a recent report, growth in cryptocurrency and digital investments has accelerated dramatically over the past year. Not only has investment increased, but so has the industry’s energy consumption. It now surpasses the energy use of several medium-sized economies. We explore the ramifications, especially as relates to the environmental costs.

Cryptocurrency is a global phenomenon. As cryptocurrency mining and use have grown, so has the impact on energy consumption around the world.

  • The energy consumption of Bitcoin has surged ~66x since late 2015 (see Figure 1) and now exceeds the total energy use of several medium-sized economies, according to Citi’s commodities strategist Aakash Doshi.
  • As of mid-April 2021, the Cambridge University Center for Alternative Finance estimates that global power demand from the Bitcoin network reached an annualized 143-TWh, ~4% higher than Argentina’s total electricity generation in 2019.
  • Aakash notes that CO2 emissions from the Bitcoin network could, however, be 60% higher than that of Argentina’s electricity sector in 2019, given that more than half of Bitcoin’s electricity demand is sourced from coal (see Figure 2).


To help to get a better picture of global crypto activity and impact, Aakash suggests that the geographical distribution of Bitcoin “hashrates” – the measuring unit of the processing power of the Bitcoin network – can serve as a proxy for regional mining activity. According to Aakash, however, this approach has drawbacks given that power efficiency and cooling needs vary. In his report, Aakash uses the geographical distribution of global Bitcoin hashrate provided by Cambridge University to calculate country-level energy consumption from Bitcoin mining. He notes that the approach could be an oversimplification, as it assumes that every Bitcoin hashrate computation consumes the same amount of electricity. In actuality, each varies depending on factors such as the mining machine and location. For example, miners located in cooler regions might require less energy for cooling. For this reason, Aakash notes that “deeper investigation into the local mining industry could provide a more holistic picture.”

Nonetheless, we highlight these key takeaways from Aakash’s report (see Figure 3):

  • In late 2019, over 75% of Bitcoin hashrate was located in China, and the US was ranked third.
  • Since then, digital mining activity has been shifting away from China, primarily to the US, Russia, Kazakhstan, and Iran.
  • China still accounts for the majority of global hashrate, hosting ~65% as of April 2020.
  • The US has moved to a second-place global hashrate ranking, overtaking Russia in 1Q’20, with over 7% share by April 2020.


As a result its "intense" energy consumption, the industry could face greater scrutiny, especially if the US continues to scale its crypto footprint and market-leader China cracks down on mining if it adversely impacts its climate goals. Potential offshoots of such scrutiny include taxation and regulatory oversight as well as measures to ensure that the industry shoulders its fair share of the environmental costs of its energy consumption. As Aakash notes, even some prominent Bitcoin proponents have acknowledged that the sector needs to do more to be energy efficient and offset emissions. However, Aakash also counters that “an area to explore and an oft-ignored counterargument is whether crypto mining and validation could itself prove to be a use case that allows for faster payback on renewable projects by utilizing otherwise curtailed capacity, thereby reducing the need for government subsidies.”

Whatever the outcome, it is clear that cryptocurrency consumes a lot of energy – not only in the minds of many investors globally but also in actual energy consumption and its impact on the environment.


Figure 1. Bitcoin Energy Consumption Has Grown Dramatically Since 2015 (Annualized)

Figure 2. Coal Is the Power Source of Electricity Most Consumed by Bitcoin

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Title: SideBySide - Description: Image|JSON##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##

Source: University of Cambridge Center for Alternative Finance, Citi Research

Source: University of Cambridge Center for Alternative Finance, BP, Citi Research


Figure 3. Geological Distribution of Global Bitcoin Hashrate Shows That China Still Hosts the Majority

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Source: University of Cambridge Center for Alternative Finance, Citi Research


For more information on this subject, please see Global Commodities: The intense energy intensity of cryptocurrencies.


Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation.It is not investment research. The comments expressed herein are summaries and/or views on selected thematic content from a Citi Research report. For the full CGI disclosure, click here.

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