QKL123 data analysis | Bitcoin's energy consumption is amazing, and its energy consumption valuation exceeds 10,000 USD / BTC

Summary: Power consumption indicators show that Bitcoin's power consumption is doubling every year, and the current energy consumption is equivalent to that of Romania or the Czech Republic. The estimation model based on energy consumption estimates that the current Bitcoin price is at a severely underestimated level.

Proof-of-work (POW) -based crypto asset projects often require a large amount of computing power, and sufficient power is needed to support the large amount of computing power. For a long time, the computing power of bitcoin's entire network far exceeds other POW-based crypto assets, and the problem of bitcoin's energy consumption has been criticized by the industry and abroad. The following will use indicators to analyze the past changes in bitcoin's energy consumption and the bitcoin price estimates related to energy consumption.

First, Bitcoin's energy consumption is amazing

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At present, there are two mainstream indicators used to estimate the electricity consumed by the entire Bitcoin network, one is the Cambridge Bitcoin Electricity Consumption Index (CBECI), and the other is the Digiconomist's Bitcoin energy consumption indicator (Bitcoin Energy Consumption Index (BECI). Comparing the energy consumption estimates of the two in the past three years, it can be found that the latter estimates are significantly higher than the former, but the overall trend is close.

Observing the power consumption indicator (CBECI indicator) above, in the past five years, Bitcoin's power consumption has basically increased at a rate of doubling every year. In particular, sharp fluctuations occur as market prices fluctuate. The historical maximum power consumption of the CBECI indicator appeared on March 2, 2020, reaching 105.49TWh, and the corresponding upper and lower power consumption limits were 180.61TWh and 48.26TWh, respectively. The historical maximum power consumption limit (192.28TWh) appeared on July 8, 2019, just after the bitcoin price peaked at the end (June end).

Recently, with the sharp drop in the price of Bitcoin and the large number of miners fleeing, the computing power of the entire network has dropped sharply. The CBECI power consumption indicator has dropped to about 70TWh, a 30% drop from the beginning of the month. According to cbeci data statistics, bitcoin's current power consumption accounts for about 0.3% of all power production and consumption in the world, exceeding Romania's annual power consumption. According to statistics from Digiconomist, bitcoin's current energy consumption is close to Czech's annual power consumption. Moreover, the power consumption of a single transaction is close to the energy consumption of 700,000 VISA payments, which is equivalent to the power consumption of an average household in the United States for 20 days, and the electronic waste generated by each transaction is 90.8 grams.

Second, the energy consumption valuation is much higher than the current price

Although the price of bitcoin has risen, it was mainly driven by market demand in the past, which has led to a continuous increase in network computing power or power input. However, this does not negate the valuation of Bitcoin from the perspective of Bitcoin production costs, especially with the continuous growth of Bitcoin, the valuation of production costs has become more and more reference value. Among them, the researcher Charles Edwards gave a valuation model based on energy consumption:

3 Among them, the constant makes the unit of energy and price unified. After calculating the bitcoin energy consumption estimates based on historical data, you can get the past bitcoin energy consumption estimates and price deviation values, as shown below.

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At present, the estimated bitcoin price according to the above model is more than 10,000 US dollars, and the market price of bitcoin recently is around 5,000 US dollars, with a downward deviation of about 50%, which is already near the historical low. There were four periods in the past where the degree of deviation was below -50%: end of 2011, end of 2014 to early 2015, 2016 and early 2019. Except for the 2016 period, the corresponding bitcoin prices for the other three periods are near the trough. Therefore, this indicator is also of reference significance for the current level of bitcoin price judgment.

References: https://www.cbeci.org/ https://digiconomist.net/ https://medium.com/capriole/bitcoin-value-energy-equivalence-6d00d1baa34a