The (Un-)Sustainability of Bitcoin Investments

Climate-related criticism toward Bitcoin is primarily based on the network’s absolute carbon emissions without consideration of Bitcoin’s market value. Taking a relative emission perspective and utilizing the mean–variance portfolio optimization framework, we study the financial and carbon implications of Bitcoin investments. Our results show that adding Bitcoin to a diversified equity portfolio can enhance the risk–return relationship of the portfolio. Furthermore, we identify realistic scenarios for which the addition of Bitcoin to a diversified equity portfolio reduces the portfolio’s aggregate carbon emissions. This finding persists under various, conservative assumptions about Bitcoin prices, carbon emission estimates, and carbon prices.