Bitcoin Mining Activity and Volatility Dynamics in the Power Market

Sayar Karmakar, Riza Demirer and Rangan Gupta
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Sayar Karmakar: University of Florida, Gainesville, FL, 32611, USA

No 202166, Working Papers from University of Pretoria, Department of Economics

Abstract: Utilizing a measure of the Bitcoin network's daily electricity load, we document a significant volatility effect of Bitcoin mining activity in three prominent electricity markets in the U.S. The volatility effect is found to be increasing over time, particularly with the widespread lockdowns enforced due to the COVID-19 pandemic. The findings provide novel insight to the non-virtual side of mining and trading of cryptocurrencies and underscore the need for establishing mechanisms to prevent possible destabilizing effects of this growing industry, both from a power consumption and carbon emissions perspective.

Keywords: Time-varying; GARCH; Bitcoin; Electricity returns (search for similar items in EconPapers)
JEL-codes: C32 C53 Q41 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2021-09
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Citations: View citations in EconPapers (10)

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