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Bitcoin Energy Consumption Will Remain an Issue in 2023

Bitcoin Energy Consumption Will Remain an Issue in 2023

created Simon petersJanuary 3 2023

Calm start to 2023 in the cryptocurrency market: both bitcoin and ethereum have remained relatively even since the beginning of the year.

Bitcoin started 2023 above $16, and in the last few days it has moved slightly higher and is now sitting around $300. Ethereum while it started the year around $1 and is now rising slightly to around $180.

Predictions for the coming year are, of course, difficult. Much depends on the current outlook for the global economy and how the cryptocurrency sector adapts to the challenges that emerged last year and will continue this year.

Bitcoin Energy Consumption Will Remain an Issue in 2023

Data from Digiconomist suggest that in 2022 bitcoin used more energy than Sweden. This created about 90 megatons of carbon pollution, more than all the savings from electric vehicles (EVs) this year.

It is clear that bitcoin has an energy problem. With several popular miners failing due to soaring energy costs, the question arises as to how the world's longest-running cryptocurrency can adapt to the changing economy and energy consumption policies we face.

Digiconomist points out that cleaner energy is starting to make up a bigger part of the bitcoin network, with natural gas increasing as part of consumption. But overall, renewables have declined as a percentage of the energy mix since 2020. With the Ethereum network, completely transformed by The Merge, now operating at 99 percent. less energy, the big question for bitcoin is how it can achieve greater energy balance in the future.

Ethereum transactions are ahead of bitcoin

According to data from Ycharts and Nasdaq, the number of ethereum transactions far surpassed bitcoin in 2022. Like the energy consumption issue mentioned earlier, this sets an interesting backdrop for the coming year for the two largest cryptocurrencies in the world.

Ethereum recorded 338 percent. more transactions than bitcoin, with more volatile activity compared to bitcoin over the course of a year. This would suggest that the way people transact in Ethereum is more hands-on, while Bitcoin transactions are more purposeful and methodical.

The use cases for both cryptocurrencies are very different at this point. Bitcoin is the original cryptocurrency and has fierce defenders who see it as an effective alternative monetary system waiting to be adopted by the world. Ethereum, on the other hand, is the platform that underpins a wide range of different cryptocurrency-related financial projects and ideas, and Ethereum is the cryptocurrency that drives these innovations.

The UK gives foreign investors tax exemption on cryptocurrencies

A technical change to the UK investment management rules has been made to include cryptocurrencies as well. The rules apply to funds managed in the UK with overseas investors.

The rule change will relieve these investors of any UK tax liability. This move is intended to promote the on-shoring of cryptocurrency investment management activities in the UK and can be seen as part of the UK government's wider effort to attract cryptocurrency services to the country.

The Financial Services and Markets Bill is currently on its way to Parliament, with potential sweeping changes to how cryptocurrencies are regulated in the UK. Far from cracking down on cryptocurrencies, this legislation aims to make the UK a hub for the market.

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About the Author
Simon peters
eToro analyst. A graduate of the Faculty of Mechanical Engineering at Brunel University in London. He is CFA UK Level 4 certified in Investment Management.

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