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On the Pricing Effects of Bitcoin Mining in the Fossil Fuel Market: The Case of Coal

Author

Listed:
  • Xolani Sibande

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Riza Demirer

    (Department of Economics and Finance, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, USA)

  • Mehmet Balcilar

    (Department of Economics, Eastern Mediterranean University, Turkish Republic of North Cyprus, Via Mersin 10, Famagusta 99628, Turkey; Department of Economics, OSTIM Technical University, Ankara 06374, Turkey)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

This paper examines the effect of crypto-currency mining activities on fossil fuel price dynamics, focusing on the coal market. Specifically, we utilise static and time-varying Granger causality tests to explore the causal linkages between Bitcoin electricity consumption and coal prices captured by the Argus/McCloskey's Coal Price Index for coal imported into northwest Europe. The results unsurprisingly reveal a time-varying causal link from the coal price to Bitcoin mining activities' electricity consumption. That is, the coal price is a constraint on mining activities. Surprisingly the evidence in the opposite direction is stronger, suggesting that electricity consumption from Bitcoin mining activities impacts the coal price. This interplay suggests that electricity consumption from Bitcoin mining activities may be larger than current estimates.

Suggested Citation

  • Xolani Sibande & Riza Demirer & Mehmet Balcilar & Rangan Gupta, 2022. "On the Pricing Effects of Bitcoin Mining in the Fossil Fuel Market: The Case of Coal," Working Papers 202239, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202239
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    Cited by:

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    More about this item

    Keywords

    Time-varying Granger causality; Crypo-currency market; Commodity Markets; Coal price;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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