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Unraveling environmental threads: Bitcoin prices, energy consumption, and crypto market volatility

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  • Sapra, Nishant
  • Shaikh, Imlak
  • Roubaud, David

Abstract

Bitcoin has evolved into a major decentralized asset, yet its escalating electricity consumption has raised concerns. Because mining is profit-driven, higher prices intensify computational activity and energy demand, directly linking market dynamics to electricity use. This study empirically investigates the dynamic relationships among Bitcoin electricity consumption, Bitcoin prices, and cryptocurrency market volatility across time and frequency domains, complemented by nonlinear causal assessment. The study applies Biwavelet Coherence, Partial-Wavelet Transform Coherence, and Diks & Panchenko techniques to 1761 daily observations from March 2020 to January 2025. The frequency-domain analysis indicates that electricity consumption leads Bitcoin prices in the long run, whereas the nonlinear causality results reveal bidirectional feedback between the two variables. Collectively, these findings suggest that Bitcoin's energy use and its price influence each other over time, forming a feedback loop rather than operating in isolation. Further, Bitcoin's electricity consumption has bidirectional nonlinear causality with cryptocurrency volatility. The findings suggest that Bitcoin's electricity consumption is more sensitive to cryptocurrency market sentiment and geopolitical risk than to traditional economic and trade policy uncertainties, implying that behavioural and geopolitical indicators may offer more informative signals for monitoring fluctuations in energy consumed within the Bitcoin network. Given the linkage between Bitcoin prices and electricity consumption, policymakers may consider upper and lower trading circuits on cryptocurrency exchanges to moderate price-driven surges in mining-related energy demand. Policymakers may also consider cryptocurrency market volatility, investor sentiment, and geopolitical risk indicators for monitoring fluctuations in Bitcoin's electricity consumption, given its observed sensitivity to these factors.

Suggested Citation

  • Sapra, Nishant & Shaikh, Imlak & Roubaud, David, 2026. "Unraveling environmental threads: Bitcoin prices, energy consumption, and crypto market volatility," Energy Economics, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:eneeco:v:156:y:2026:i:c:s0140988326000952
    DOI: 10.1016/j.eneco.2026.109216
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