Sustainable Cryptocurrency Growth Impossible? Impact of Network Power Demand on Bitcoin Price

Pavel Baboshkin (), Alexey Mikhaylov and Zaffar Ahmed Shaikh ()
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Pavel Baboshkin: Financial University under the Government of the Russian Federation, Moscow 125993, Russian Federation
Zaffar Ahmed Shaikh: Benazir Bhutto Shaheed University Lyari, Faculty of Computing Science and Information Technology, Karachi 75660, Pakistan

Finansovyj žhurnal — Financial Journal, 2022, issue 3, 116-130

Abstract: Due to the youth of the cryptocurrency sphere, the logic of interaction between investors, users and protocols is not always precisely defined. Analysis of the impact of ESG on cryptocurrencies proves that the demand for bitcoin network capacity (occupies the main market share) is the main factor in predicting the price of this cryptocurrency and the cryptocurrency market as a whole. The choice of the statistical method of analysis is determined by the purpose of statistically justified determination of the relationship of the data under consideration, and the reliability of the analysis is checked using Fischer and Student tests. In this paper, several innovations are proposed to solve the problem of energy dependence of cryptocurrencies: firstly, the analysis of cryptocurrencies in the paradigm of sustainable development (taking into account the consumption of a huge amount of energy for the functioning of cryptocurrency systems); secondly, feedback logic to explain the interaction of subjects, including the following parties: users, developers, network infrastructure and their interaction; thirdly, statistical analysis with the creation of artificial variables from real data and iterative improvement of the model. This paper proves that sustainable cryptocurrency growth is impossible when viewed from the perspective of “Green Economics” by Molly Scott Cato. The author's approach is relevant compared to other methods of linear transformations for creating artificial variables by selecting data using the VIF test. As a result, several versions of models were obtained using various combinations of the initially proposed factors, on the basis of which the nature of the greatest influence on the price of bitcoin was established in the form of technical factors and energy infrastructure needs.

Keywords: cryptocurrency; investor behavior; bitcoin; data privacy; ESG factors; concept of green economy (search for similar items in EconPapers)
JEL-codes: E52 Q43 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:220308:p:116-130

DOI: 10.31107/2075-1990-2022-3-116-130

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