Bitcoin Carbon Emissions Taxes: Should you be Worried?
Since its emergence in 2009, Bitcoin has garnered much attention and is currently at the top of an ever-growing cryptocurrency market. The coin, which operates on a public ledger called the blockchain, is one of the most trusted virtual currencies thanks to its security and partially anonymous transactions.
To secure the bitcoin network, miners use high-powered, energy-consuming computers while they get bitcoin in exchange. Energy consumption results in carbon emissions. A new analysis from the European Central Bank (ECB) suggests that carbon taxes on cryptocurrency transactions and a ban on mining proof-of-work assets like Bitcoin may be necessary to curb these emissions in the future.
Furthermore, the cryptocurrency market, known for its dramatic price fluctuations, has seen a catastrophic price drop over the past year, and 2023 is already off to a rocky start. Geopolitical strategist Peter Zeihan explained that the bitcoin price could go negative, which has sparked significant fears among some of the largest bitcoin and crypto enterprises.
Both the talk of carbon emission taxes and the current fall of the crypto market value are enough to worry any crypto holder. However, before panicking, you should understand how Bitcoin gets its value, the impact of its carbon footprint, and if the coin can go negative. Here, we address these issues, providing in-depth information to help you make better investment decisions shortly.
How does Intrinsic Value affect Bitcoin?
The intrinsic value of an asset is the actual value it has in itself, not one provided by a third party. For instance, a company's intrinsic value is the estimated value of its assets alongside its annual turnover. Many assets and currencies are backed by gold and other precious metals, giving them an intrinsic value.
There are many ways to determine an asset’s intrinsic value. One of these methods is to use a number-based approach to assess a company's true worth. For example, you might look at its profits, financial statements, or price-to-earnings ratio. However, intrinsic value can also be calculated qualitatively, using details like a company's business model or cash flow.
The intrinsic value of assets is vital information for every investor, as it lets you know if a stock sells for less or more than its actual value. This helps you make better investment decisions. For instance, if there’s potential in a startup business, you buy its shares while they're still selling at a lower price and reap the profits later.
What gives bitcoin its value?
The value of Bitcoin doesn’t work like that of stocks, and these assets have no intrinsic value. If this is so, how is Bitcoin so valuable, and why is it so expensive?
To answer this, let’s look at the currency in a country. Any currency's worth is determined by the state's backing, and the faith people have placed in their government. As a result, a network must first trust the currency to be accepted as a medium of exchange of value within the network.
This is why Bitcoin is becoming more valuable. Simply put, a cryptocurrency's value is based on how much faith millions of people have in it. The price of the world's most popular cryptocurrency depends on market forces of supply and demand, which are trusted by the Bitcoin networks of miners and dealers.
This value has also earned it more publicity, and today, Bitcoin is accepted at many online casinos and sportsbooks. As a result, punters can easily use them to place bets when playing games or betting on sports, assisted by the method Bookmakers.bet explain the nature of online crypto platforms. Thus, you can check out this guide for the best crypto-betting sites.
What is the carbon footprint of bitcoin?
Bitcoin was the first cryptocurrency to successfully validate transactions through decentralised data protocol, which is one of the reasons it became popular in the first place. This verification procedure consumes a lot resulting in many carbon emissions.
Experts from the University of Cambridge estimated that Bitcoin miners had contributed about 200 million tons of carbon dioxide to the atmosphere throughout the cryptocurrency's brief existence. They concluded that over the past 13 years, the cumulative emissions from bitcoin have been more significant than those from all of Colombia in 2018.
With China's expulsion of bitcoin miners in 2021, the United States surpassed China as the leading bitcoin mining nation, accounting for about 38% of the global bitcoin hash rate. This led to an increase in the percentage of renewable energy used in the production of bitcoin, which is a plus.
What to keep in mind is that to lower their carbon emissions, many nations have instituted carbon taxes in recent years. For example, in June last year, Denmark's legislature passed the highest business carbon tax. However, the United States doesn’t have a national carbon tax since the notion was considered politically risky and challenging, making it difficult to pass during the Biden administration.
Despite bitcoin's price decline over the past year, many investors are still confident it will soon soar again. This is partly thanks to Mark Cuban. The wealthy Shark Tank star, who has previously criticised bitcoin, has stated when he would repurchase it. Plus, with how fast the crypto market value could change, there could be a significant positive drift in Bitcoin’s price in the future.
Can bitcoin go negative?
While Bitcoin struggles, things seem positive. However, there are fears of the virtual asset’s price dropping even further. Considering the talks of carbon taxes, Peter Zeihan analysed how Bitcoin could go negative. To support his point, he added that cryptocurrency doesn't have a store of value and is not deemed a medium of exchange.
Despite this, Bitcoin has been faring well. As of February 21, 2023, Bitcoin traded around new highs of $25,000 for the first time in the past six months. The current daily trading volume of bitcoin is approximately $27 billion. As macroeconomic conditions improve and investors regain confidence, Bitcoin is responding favourably and has climbed by about 14% in value during the past week.
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