Investing In Sustainable Crypto And In Cryptocurrencies : What Could Be The Motivations?

According to the United Nations Brundtland Commission, sustainability is defined as "meeting the needs of the present without compromising the ability of future generations to meet their own needs." Sustainability is at the heart of all discussions and decisions and is set as an ultimate goal to be reached by this decade. Among these trending topics that involve sustainability is cryptocurrency.

We discussed the toxic impact of cryptocurrency mining on the environment in a previous article. For this reason, and to keep the cryptocurrency industry alive, some initiatives had to be launched. Cryptocurrency mining has to become more sustainable because of the drastic amount of electricity it is draining, especially for Bitcoin, the most notorious cryptocurrency to exist. In order to know more about blockchain, crypto, and mining energy consumption, we invite you to visit this article.

Investing in sustainable crypto: environmental impact obliges

The environmental impact of crypto cannot be hidden nor ignored. The energy consumed by the Proof of Work consensus is equivalent to that of entire countries. In late 2021, according to Legal500, China banned all cryptocurrency transactions and crypto mining, while Russia seems to be considering applying the same decision in order to meet its green agenda. They are followed by Swedish regulators who are encouraging Bitcoin ban in order to be able to meet the Paris Climate obligations. 

Consequently, there are two options for investors; whether they invest in crypto that is considered more sustainable since they do not rely on Proof of Work, but on other alternatives which require less power, or they wait for the most famous and demanded crypto coins, such as Bitcoin, to be shifted from Proof of Work to Proof of Stake for example. What can be considered as certain is that the energy consumption required by the current digital currencies like Bitcoin can no longer be accepted due to the catastrophic carbon footprint. It sounds like shifting to sustainability - even for those who are not necessarily accepting the idea of it - is not an option anymore. 

In light of the current international energy transition to more renewable energy, it appears that the only other option for Proof of Work consensus is to rely on 100% renewable energy provision. According to Legal500, Iceland is an example of a country in which electricity alimentation comes 100% from renewables, including mining.

Sustainable cryptocurrencies also have their unique characteristics. This could be one more reason for investors to get interested in investing in those cryptocurrencies.

Cardano (CRYPTO:ADA) is a well-known example of a "green cryptocurrency." By market cap, it was the most important proof-of-stake cryptocurrency until 2021. On the Leafscore website, it is said that this digital currency is famous for only consuming 6 GWh of power which makes it a “balanced and sustainable ecosystem”. This crypto coin is known to be 37,500 times more energy-efficient than Bitcoin. Cardano also seeks to solve real-world challenges. For example, they are collaborating with Ethiopian schools to help them keep track of their students' records by storing them on the Cardano blockchain.

Cardano's goal is to create a programmable ecosystem that can solve real-world challenges. One significant example is its collaboration with the Ethiopian government, which includes schools keeping student information on the Cardano blockchain.

Avalanche, another example of sustainable crypto has been confirmed in a study named Energy efficiency and carbon emissions of PoS Networks by The Crypto Carbon Ratings Institute (CCRI) to be Consuming 35,000x Less Energy Than Ethereum and 200,000x Less Than Bitcoin.

When taking a look at the balance between whether to invest or not in cryptocurrencies, we can see that the positive elements are winning over the negative impacts. Along with the growth and profitability of crypto, they have, for instance, brought innovative technologies which will impact the daily life of people, companies, and even governments. It also seems like the drawbacks of cryptocurrencies are on their way to being fixed. Sustainable cryptocurrencies and renewable energies for electricity-draining consensuses appear to be relevant solutions for the moment.

Cryptocurrencies are driving an enormous number of investors. They are aware of the risks related to digital currencies and are still willing to give them a chance. However, according to Morningstar, The value of cryptocurrencies went from “$5.2 billion in market capitalization for the top 100 coins to nearly $1.7 trillion as of January 2022”

While opinions diverge about whether it is wise or less wise to invest in crypto, today we will focus on the factors that are encouraging people to invest in Bitcoin or Altcoins. This infographic was published by Blockpit_io on Twitter analyzing “Why do men and women invest in crypto?” and it turns out it is for these reasons :

• Investing in the interest in technology

With a rising interest in technology and the fact that some people are by essence Digital Natives, there is absolutely no way they could pass by such a world-changing innovation without testing it. Crypto is the new trend, accessible to anybody and everybody without any constraints.

• An opportunity created by crypto: access to banking

According to a report released by the World Bank, 1.7 billion people beyond 15 years old do not have access to banking. Crypto makes it more accessible to have the opportunity to store money, exchange money and get freed from financial institutions’ coercion.

Smart contracts have made the financial world easier in a way that thanks to blockchain technology, the authority is no longer centralised and dependent on a central financial institution. Nodes distributed all over the world detain each a portion of authority making everything decentralised and visible on the blockchain. Despite the fact that governments are sceptical about the future of cryptocurrencies and are insisting on monitoring their development, it seems like the decentralisation of crypto will solve many issues across the industries, one of which is the decrease of transfer transactions across seas thanks to this digital currency or identity protection.

• Crypto considered the future of the investment markets

One of the most appealing characteristics of cryptocurrencies is that they offer an innovative, more secure, and accessible alternative to the traditional banking and financial sector. Crypto is also offering to decentralise the authority that is held by only financial institutions which is attracting the attention of people, businesses, and authorities. This means that crypto could be the future of not only investment markets but financial institutions in general. This possibility is giving more legitimacy to cryptocurrency and appears safer to potential investors.

• The interest in rapid and high profitability in the crypto market

The crypto market is very volatile because cryptocurrencies are not backed by assets or cash flow; the factor that is driving the ups and downs of the market is sentiment. People invest because they feel hope for the future, and they back off because they feel wary or more prudent. In conclusion, there is very high profitability due to their scarcity as well, but there are also great risks with it - even greater than stocks -

• Portfolio diversification: how to better diversify than to hold crypto?

Along with holding stocks or bonds, investing in cryptocurrencies is a way to diversify one's portfolio, especially with the large choice of digital coins offered to potential investors. The great assortment of crypto coins - with some more appearing daily - fosters the hype related to investments and the greed for always aiming for more profit. 

According to a recent survey on Morningstar, other reasons could be:

• Extra money to invest: cryptocurrencies also fit in a digital wallet

According to a study on Morningstar, people who invest in cryptocurrencies tend to have higher incomes. The extra money traditionally kept in a savings account is now invested in crypto. 

• A hedge against inflation: crypto coins and their specificities

Even though cryptocurrencies differ importantly, also through the way their values are set, Bitcoin for example sound interesting to investors because of their built-in scarcity. The total number of Bitcoin is predetermined and is equal to 21 million. There is no more than can be created that can protect the cryptocurrency from inflation. The 21 million possessed units will gain value as demand for Bitcoin increases. 

• NFTs : be part of the trend of selling and buying crypto through digital items

NFTs could be a motivating reason to invest in crypto, these diversified digital pieces are attracting more than one fascinated individual. NFTs are not only a success driving high profitability, but many of them are offering perks and unique advantages from owning NFTs along with the fact that being a seller of NFTs allows them to ask for permanent royalties or even consequent sale of the same piece. 

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