The Pricing Implications of Cryptocurrency Mining on Global Electricity Markets: Evidence from Quantile Causality Tests

This paper examines the causal interactions between various measures of energy consumption due to mining activity and electricity return and volatility patterns across the power markets in the U.S., U.K. and Europe via a nonlinear causality model that accommodates structural breaks and regime shifts in the bivariate interactions. Our findings establish a causal relationship running from bitcoin mining activity, proxied by the Cambridge Bitcoin Electricity Consumption Index, to Phelix electricity price returns, the reference price for the power spot market for the German/Austrian market area. This suggests that mining activity can induce wealth effects in the real economy; however, the effect is heterogeneous across the different power markets examined. At the same time, we find that the effect of mining activity is focused on return volatility, consistently for all three proxies of bitcoin electricity consumption and all the electricity markets examined. Accordingly, our findings provide robust evidence of volatility effects of mining activity in power markets across both sides of the Atlantic, suggesting that the crypto mining-power market nexus primarily entails risk effects, an issue of particular concern for hedgers whose goal is to stabilize energy costs in their operations.