Bitcoin Mining: A First Cut

Issue #8 – June 16, 2022

Source: 3iQ Research. Data sourced from BP Statistical Review of World Energy 2021, 70th Edition.


The global energy complex is a dynamic system, making basic measurement difficult, and forecasting an endeavor bordering on folly. We cite the excerpt below from BP’s Statistical Review of World Energy 2021 report as an example that even the industry standard in global energy measurement can fail when it comes to estimating.

  • “The costs of onshore wind and solar power have fallen by around 40% and 55% respectively over the past five years. Far more than the 15% and 20% assumed in the 2016 Outlook.”

             Source: BP Statistical Review of World Energy 2021, Pg 9.

In this instance, a recognized source of energy statistics was off by more than 100% in a 5-year estimate on the change in two sources of sustainable energy with large samples. 

We launch our first piece on Bitcoin Mining energy use with this citation to underscore the perils of forecasting energy use and consumption. Be it the standards for capture, incentives, or changes in technology, forecasting is difficult, so we will focus on historical data and market dynamics to frame our discussion.

Fact checking is a good start. However, if a well-resourced, regulated entity like BP can produce an estimate that is off by over 2x, it may make sense to garner multiple sources for a single statistic. A measure twice, cut once approach.

In that spirit, when we see that BP’s 2021 annual study on energy consumption and a more recent review by the Bitcoin Mining Council (BMC) BOTH share similar findings on global fossil fuel consumption, we gain confidence that the 80-83% finding is accurate (as seen in our first table). 


Bitcoin Council Study on Miner Energy Sources and Uses

The Q1 2022 study by the BMC sampled 44 mining companies representing 50% of the global network to assess the state of the global Bitcoin mining industry. Data supporting the improving trends in energy efficiency were also found in data from the University of Cambridge’s Cambridge Bitcoin Electricity Consumption Index (CBEC). These sources put Bitcoin mining’s consumption between 0.16% to 0.18% of the world’s ~ 170 TWh energy production.

Critics of Bitcoin mining have stated that even the 0.16% is too much, as it equals the energy usage of a small European country.  Supporters, such as the BMC, cite Bitcoin’s energy use as a bit more usage than from holiday lights and computer gaming. Of these three comparisons, we see the comp to computer gaming and holiday lights as more apt since they are also taken from a global sample.

However, as it relates to utility, the benefit of a secure, peer-to-peer, permissionless, decentralized, global monetary network may warrant the use. Another benefit of a non-sovereign energy user could be the ability to access trapped energy across the globe, transforming it into digital form for global use. What do you think the approximately 1.7 billion unbanked people in the world1 would vote for…another video game and blinking lights or a seat at the world’s banking table?  The table below shows the improved efficiency as measured in Exahashes or Quintillions of calculations per second per Gigawatt of energy…more calculations for the same amount of energy.  

World Bank’s April 2018 study1.

The ‘BMC Miners’ stat of 22.9 refers to the actual data submitted by the 44 miners for Q1 022, separate from the estimates for the larger, global fleet shared in the preceding quarterly data



Where there is consensus from several sources that fossil fuel use sits at ~ 80% globally with the U.S at 69%, Canada at 78%, and China at 83%, there is less clarity on Bitcoin Miner fossil use. Where the University of Cambridge data from May 2021 states miner energy use is 39% sustainable, the BMC’s Q1 2022 report asserts 58% sustainable energy sources.

Sample differences and the shift away from China after their May 2021 ban, are potential drivers of the difference. The hash rate stats by country support the potential impact from the Q2 2021 China ban as China mining was cut by more than half as shown below.

From a political standpoint, we wonder if President Biden’s March 9th Executive Order and Janet Yellen’s about face on Bitcoin in April of this year were made to cement the surge in US mining. The recent increase in Russian and Iranian miners and resumption of activity in China may have been contributing factors to the shift in attitude by the Biden Administration.




In fact, the Q1, 2021 BMC data (shown below) is very similar to the May 2021 data point from the University of Cambridge’s Bitcoin Mining Index – supporting the notion that the migration from China in Q2 2021 resulted in a more sustainable mix. The ‘BMC Miners’ stat of 64.6% refers to the actual data submitted by the 44 miners for Q1 2022, separate from the estimates for the larger, global fleet shared in the preceding quarterly data.


Forgoing the above, assuming that sustainability may lie somewhere between the 39% and 58% estimates, Bitcoin Miners are still more than 2x the world’s average rate of sustainable energy use.

With that in mind, we leverage the more robust and recent BMC findings, where we see that Bitcoin mining’s 0.16% consumption of total global energy use results in just 0.085% of global carbon emissions.

All while hash rate, a proxy for security, INCREASED +23% YoY, while Energy usage DECLINED -25% YoY.

This increased efficiency, above average use of sustainable energy sources, and increased security as measured by hash rate, may have contributed to the increased adoption and improved volatility profile explored in greater detail below.


Digital Asset Universe


Bitcoin Dominance – or share of the Digital Asset ecosystem – has increased during 2022’s pullback to a YTD peak of 48%.  This is consistent with previous periods of general price decline across digital assets, affirming Bitcoin’s position as the safer haven during risk-off periods.


Source: 3iQ Research. Data sourced from Coin.Dance, as of June 7, 2022.


However, we see Bitcoin’s 48% share as an overall constructive signal for the industry as a whole. 

Today’s Bitcoin Dominance level is well below the 58% average despite the more than halving of the industry’s market cap to ~$ 1.3 trillion and speaks to a broader adoption of protocols today relative to other periods.  Ethereum, being the largest contributor to this change in Bitcoin Dominance.


Source: 3iQ Research. Data sourced from Messari as of June 7, 2022. Figures expressed in USD unless otherwise stated. Past performance is not indicative of future results.


Source: 3iQ Research. Data sourced from Bloomberg as of June 7, 2022. Past performance is not indicative of future results. 


Bitcoin performance…

  • Has declined in correlation to the S&P 500 & NASDAQ since Mid-May’s all time high correlation, set after the collapse in Terra/Luna.
  • Worth mentioning as this follows past patterns of brief elevated correlation of BTC and ETH to equities before declining. With overall performance mixed for both assets recently, we see the break as an overall positive for managers who could be looking to gain diversification. See our May 9th Bulletin for more information.
  • BTC’s 63D volatility of 61% remains below the trailing 4-year average of 71%, despite posting outsized declines of -14% and -8% on May 9th and May 11th respectively. 
  • ETH’s 63d volatility of 74% is likewise below its 4-year trailing average of 93%.
    • Conversely, ALL of the 63d volatilities across equities, commodities and rates we assessed are above their 4-year trailing averages. See our May 16th and June 6th Bulletins for more detail.
    • Significant as we believe the stresses in today’s markets around inflation, growth and rate hikes are impacting these traditional assets more than BTC and ETH, as it relates to price.


Source: 3iQ Research. Data sourced from Bloomberg as of June 7, 2022. You cannot invest directly in an index.  Past performance is not indicative of future results.

Landing the Performance Plane

Another week has passed, and the number one question remains: Are we in a Crypto Winter? We offer a few answers below since a simple yes/no answer does NOT help inform on when and where to allocate.

Yes. And for reasons we lay out in our previous Bulletins that speak to BTC and ETH protocol integrity, this chilly season will pass in our opinion. 

No. The declining volatility profiles for both ETH and BTC translates to MORE certainty…a very different outcome when compared to increasing volatility in equities, commodities, and rates.

Our cheeky answer is meant to refocus the query from the opaque classification of a Crypto Winter to specific observables such as adoption rates, network traffic, and relative volatility profiles.


Reviewing the Data

BTC is -29% over the past three months and -25% over the past month alone. This 1m return profile highlights a meaningful period of underperformance for BTC, that ETH (-39% over the past month) also shares.

Investors wondering about the duration of this performance may look to the 2d combined loss of ~ 23% in Mid-May when the Luna Foundation Guard (LFG) sold a majority of their $3 billion in BTC to support their protocol. 

Where this action was temporary and absorbed by the market as noted in our May 16th Bulletinwe see the increasing adoption by institutions as measured by 10-Q references noted in last week’s bulletin and the increase in wallets as a positive and more enduring trend.


Research Team

Mark Connors

Mark Connors

Head of Research

Herbert Zhang, CFA

Herbert Zhang, CFA

Director and Portfolio Manager

Connor Loewen

Connor Loewen

Cryptocurrency Analyst

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Founded in 2012, 3iQ is a Canadian digital asset investment fund manager with more than C$1.5 billion in assets under management. 3iQ offers investors convenient and familiar investment products to gain exposure to digital assets. For more information about 3iQ and its digital asset investment funds, visit or follow us on Twitter @3iQ_corp.

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Fred Pye

Frederick T. Pye


Frederick T. Pye is the Chairman, Chief Executive Officer and Director of 3iQ Corp. He is also the Chairman and Director of 3iQ Digital Holdings Inc. Mr. Pye is recognized for creating and promoting creative and unique investment products for the investment industry.

Mr. Pye has managed private client portfolios with Landry Investment Management and various other investment dealers. Prior to this Mr. Pye was Founder, President & Chief Executive Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing quantitative investment portfolios including the first long-short mutual fund in Canada.

He was also Senior Vice-President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange.

Mr. Pye obtained a Masters in Business Administration from Concordia University.