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Quantifying the asymmetric information flow between Bitcoin prices and electricity consumption

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  • Maiti, Moinak
  • Vukovic, Darko B.
  • Frömmel, Michael

Abstract

The present study uses transfer entropy and effective transfer entropy to quantify the asymmetric information flow between monthly Bitcoin prices (Price) and total Bitcoin electricity consumption (Electricity). Both the Shannon and Rényi estimates confirm a statistically significant information flow from Price to Electricity. However, Shannon and Rényi methods yield mixed results in quantifying the information flow for Electricity to Price. That indicates a possible non homogeneous and chaotic impact of total Bitcoin electricity consumption on Bitcoin prices. However, the Rényi transfer entropy value converges with Shannon's as the value of q approaches to 1. The study findings are highly useful for managing the energy mix and carbon emissions associated with Bitcoin & other cryptocurrency mining.

Suggested Citation

  • Maiti, Moinak & Vukovic, Darko B. & Frömmel, Michael, 2023. "Quantifying the asymmetric information flow between Bitcoin prices and electricity consumption," Finance Research Letters, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005354
    DOI: 10.1016/j.frl.2023.104163
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    References listed on IDEAS

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    1. Maiti, Moinak, 2022. "Does development in venture capital investments influence green growth?," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
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    7. Anh Ngoc Quang Huynh & Duy Duong & Tobias Burggraf & Hien Thi Thu Luong & Nam Huu Bui, 2022. "Correction to: Energy Consumption and Bitcoin Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(1), pages 95-95, March.
    8. Li, Jingming & Li, Nianping & Peng, Jinqing & Cui, Haijiao & Wu, Zhibin, 2019. "Energy consumption of cryptocurrency mining: A study of electricity consumption in mining cryptocurrencies," Energy, Elsevier, vol. 168(C), pages 160-168.
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    Cited by:

    1. Zhong, Yufei & Chen, Xuesheng & Wang, Chengfang & Wang, Zhixian & Zhang, Yuchen, 2023. "The hedging performance of green bond markets in China and the U.S.: Novel evidence from cryptocurrency uncertainty," Energy Economics, Elsevier, vol. 128(C).
    2. Özer, Mustafa & Vukovic, Darko B. & Frömmel, Michael & Kamişli, Serap, 2023. "The effects of Covid-19 related response policies on the performances of technology-driven financial services companies," Finance Research Letters, Elsevier, vol. 58(PD).

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