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Bitcoin is the most ESG-friendly investment

I am a financial advisor and my clients have owned bitcoin since 2019. In recent years, several of them have expressed concerns about Bitcoin’s ESG credentials. How ironic. My analysis indicates that not only is bitcoin more ESG-friendly than you’ve heard, but it’s probably the most ESG-positive investment in my clients’ portfolios. This is why. Environment There are several ways Bitcoin is a net positive for the environment, not a net negative. At a minimum, Bitcoin aims to replace the market for gold. If it succeeds, the world will be in a much better position as far as the environment is concerned. That’s because the gold mining industry today produces more than three times as many carbon emissions as Bitcoin, while also pouring toxic chemicals into the ground. In addition, Bitcoin is encouraging the proliferation of renewable, non-greenhouse gas energy sources. Before Bitcoin, electricity markets were local or regional, but not global. That’s because electricity doesn’t travel more than a few hundred miles. This meant there was no way to harness many solar, wind, hydro, and geothermal resources because the population centers that could consume the electricity generated were too far away. Bitcoin solves this. Since Bitcoin mining facilities can be located anywhere in the world with a source of electricity and low-bandwidth internet, Bitcoin unlocks stranded clean energy sources far from population centers. This increases unit sales for solar, wind, hydropower and geothermal production equipment, funding the research and development budgets of the companies that make these clean energy units. This lowers the total cost of clean energy production, unlocking more stranded assets, in a beneficial cycle. Yet another great benefit Bitcoin brings to the grid is the base load demand that can be easily turned off when the aggregate demand for electricity exceeds the supply. A good illustration of the problem was the Texas power outages in 2021. While the Texas grid had sufficient capacity to meet household needs under normal conditions, storms resulted in significant production cuts that left millions of Texans in the dark and cold. Today, Texas is the main destination for new Bitcoin mining rigs in the United States, and this will help prevent future blackouts. That’s because Bitcoin mining encourages the installation of additional power generation, and Bitcoin mining is the easiest source of demand to shut down in a supply crisis. Unlike households that cannot afford to be without electricity or businesses that take hours or days to cut their electricity usage, Bitcoin miners can safely shut down in minutes. They can therefore support a larger total installed base of power production and most efficiently absorb the impact in the event of a production outage. Households and businesses will eventually have an electricity grid that is more robust and reliable. In the long run, arguably the most important way Bitcoin can improve the environment is to discourage frivolous spending. In a world of near zero interest rates, people are pushed to spend their money instead of saving it. Since every product and service requires a certain amount of energy to produce, a world with un-manipulated interest rates could see a significant decrease in unnecessary energy consumption. Social The gold mining industry not only consumes a lot of energy and emits chemicals; it is also notorious for providing corrupt governments with fixed assets that can be easily exploited. The average citizen takes dirty jobs while the government-affiliated elites suck the surplus. It seems no coincidence that many of the most corrupt and governments sit on top of resource-rich countries. But the negative social consequences of the existing fiat monetary system are also many: Inflationary: The system introduces a tax known as inflation, as the government prints dollars, and those new dollars erode the purchasing power of dollars already in circulation . : Unlike other taxes, the inflation tax rate is established without the involvement of Congress, effectively making it taxing without representation. Regressive: The tax is regressive because the poor have a higher percentage of their dollar net worth than the rich, and decades of simple monetary policy support the value of assets owned by the rich, such as stocks and real estate. Bitcoin fixes all t his. The fixed money supply removes the inflation tax which is incalculable, unrepresentative and regressive. Governance In a diverse country like the United States, the legitimacy of leadership requires diversity. So let’s take a look at the diversity of the dollar’s governing body: the Federal Reserve Open Market Committee (FOMC). At the time of writing this article, two members of the committee had recently resigned due to active trading. (We won’t dwell here on why a member of the world’s most powerful setter of the interest rates that drives up asset prices should not actively trade). But before the resignation, of the eleven members of the committee listed on Wikipedia, only three were women. In addition, only one board member is not white (in this case, Raphael W. Bostic, the first African-American and first openly gay person to head a regional Federal Reserve bank). No board member is under the age of 50. So the organization levying the inflation tax was, until recently, about 73% male, 91% white, and 100% over the age of 50 (and 63% over the age of 60). on the other hand, Bitcoin has no gender, race or age. Monetary policy is 100% transparent and algorithmic. Literally anyone can use the network without censorship. (Although the network is monitored and a favorite tool of law enforcement). Conclusion Whether it’s just displacing gold or whether it’s reaching its potential and displacing ever-inflating and misery-inducing fiat currencies, bitcoin will be a vast improvement over what came before, and it’s as ESG as can be. While no monetary system is perfect, Bitcoin appears to be a major ESG improvement over the existing system. In fact, it’s probably the most ESG-friendly investment in my clients’ portfolios. The opinions expressed in this article are those of the author and none other. This is a guest post from Andy Edstrom. The opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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