Visualizing the Carbon Footprint of Gold and Bitcoin
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Comparing the Carbon Footprint of Gold and Bitcoin

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The following content is sponsored by Prospector Portal.

Gold Bitcoin Carbon Footprint

The Carbon Footprint of Gold and Bitcoin

The year 2020 shook economies and financial markets around the world, creating uncertainty and volatility. This led investors to seek out alternative assets such as gold or bitcoin to weather the storm. Bitcoin stole the headlines from gold and attracted new investors in record numbers.

While this digital asset may exist in the electronic cloud, its increased adoption and energy use have significant environmental impacts. This infographic sponsored by Prospector Portal takes a look at the carbon footprint of bitcoin and gold.

Price Performance Increases Adoption

In early May, the value of the bitcoin market was $1.05 trillion, only 9% of the gold market’s $11.67 trillion value. Despite this, bitcoin performance is rising to challenge gold as an alternative asset in volatile markets.

In 2020, gold delivered a strong return with 25.12% over the year, and reached a historic high of $2,067 per ounce in August. However, the value of bitcoin rose 536.7% between May 2020 and May 2021, outperforming pretty much every asset possible over that timeframe.

According to Reuters, investors poured $5.6 billion into cryptocurrency funds and products in 2020, up more than 600% from 2019. This increased activity led to increased trading in the Bitcoin network, needing more energy.

Each $1 billion in inflows into Bitcoin uses the same amount of energy as 1.2 million cars”
– Bank of America

The Bitcoin network uses massive amounts of computational power to validate transactions as people trade bitcoin. For example, if you did some rough math, it would take 1,312 lightning strikes or you would have to drive 1,240,476 miles to produce the energy to mine one bitcoin. This amount of energy translates into serious emissions.

Comparing Carbon Footprints

Digital assets are deceiving in that they appear to generate out of thin air, but there is real power usage behind mining bitcoin. According to independent researchers Max Krause and Thabet Tolaymat, it takes 17 megajoules (MJ) of computer power to generate $1 of bitcoin and only 5MJ of energy to produce $1 of gold.

In fact, bitcoin mining is nearly 15X more carbon intensive than mining an equivalent amount of gold (in dollar terms). The carbon footprint of a single mined bitcoin (including fees) amounts to 191 tonnes of carbon dioxide while to mine the equivalent value in gold, it would only take 13 tonnes of carbon dioxide.

Hard Asset or Digital Drain?

The debate around the value and use of bitcoin and gold takes center stage while its environmental impacts lurk in the shadows. This is not unique to bitcoin, as obviously gold has its own footprint on the environment. That said, both of these assets are mined out of sight and out of mind for end consumers.

However, gold has always been gold, even before the advent of electrification. How much is a bitcoin worth when the lights go out?

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Fixed Income ETFs: Investors’ Ticket to Flexibility

Fixed income ETFs are a go-to tool for institutional investors. Find out why professionals use them in this graphic.

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Fixed Income ETFs

Download the ETF Snapshot for free.

Fixed Income ETFs: Investors’ Ticket to Flexibility

When market volatility surges, fixed income investors encounter multiple pressure points. For example, they may face difficulties with liquidity, price discovery, and transaction costs.

In this infographic from iShares, we show how fixed income ETFs help address these challenges. It’s the second in a five-part series covering key insights from the ETF Snapshot, a comprehensive report on how institutional investors manage volatility.

The Methodology

To assess the role that ETFs play, Institutional Investor published a report in 2021 based on a survey of 766 decision makers. Respondents were from various types of organizations, firm sizes, and regions.

For instance, here is how responses broke down by location:

  • 21% Asia Pacific
  • 36% North America
  • 29% Europe, Middle East and Africa
  • 14% Latin America

Here’s what the survey found.

Encountering Roadblocks

During 2020 market volatility, the vast majority of institutional investors said they had difficulty sourcing (95%) and/or transacting (92%) in individual bonds.

Smaller firms faced these roadblock more often than larger institutions.

Assets Under Management% Who Faced Great Difficulty Sourcing Bonds
$5B or less61%
$5B-$50B46%
$50B+42%

How did institutional investors overcome these liquidity challenges?

Turning to Fixed income ETFs

More than half of institutions increased their use of ETFs as they looked to source, price, and transact bonds. In fact, in the first three months of 2020, fixed income ETF trading volume reached $1.3 trillion—half of 2019’s total.

ETFs also became more popular relative to their underlying basket of securities. During extreme volatility in April 2020, ETF trading volume relative to the underlying securities was three times higher than the 2019-2020 average.

With their higher liquidity, ETFs also helped institutional investors with price discovery.

“When there was no trading activity in certain corporate bonds, you can use the ETFs as a pretty good proxy for what people are willing to pay and what the appetite is.”
—Senior Analyst, Asset Management firm

However, the usefulness of fixed income ETFs goes far beyond liquidity.

Want more institutional insights into ETFs?

ETF Snapshot

Download The ETF Snapshot for free.

A Versatile Tool

Institutional investors said fixed income ETFs were a good replacement for individual bonds for a number of reasons.

Reason % of Respondents
Liquidity61%
Quick Market Exposure/Access55%
Avoidance of Individual Security Analysis51%
Transparency of Holdings46%
Transaction Costs40%

The difference in transaction costs is particularly evident in the fixed income landscape. During extreme market volatility in March 2020, the bid-ask spread* for the iShares High Yield Corporate Bond ETF was 48 times smaller than the underlying securities.

* A bid-ask spread measures the difference between what an investor is willing to buy a fund for (the bid price) and the price an investor is willing to sell for (the ask price). A smaller bid-ask spread indicates greater cost efficiency.

In light of these attributes, fixed income ETFs are a go-to tool for institutional investors. In fact, they were top-rated for a number of use cases.

Purpose% of Respondents
Portfolio Rebalancing62%
Tactical Adjustments66%
Derivative Complement/Replacement66%
Transition Management74%
Liquidity Management83%

One senior analyst at an asset management firm noted that it was easy to get granular with asset allocation because there are so many ETFs with plenty of liquidity.

The Future of Fixed Income ETFs

As of May 2021, fixed income ETFs made up 18% of all ETF assets under management. It’s likely that their role could become more prominent in the future.

For instance, 34% of institutional investors are likely to increase their use of fixed income ETFs going forward. One thing is evident: fixed income ETFs have proven to be flexible tools, especially during heightened market volatility.

​​Download the ETF snapshot for free.

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Visualizing Carbon Storage in Earth’s Ecosystems

Forests are vital carbon sinks, soaking up about 40% of all emissions annually. Here is the carbon storage of ecosystems around the world.

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Carbon Storage

Visualizing Carbon Storage in Earth’s Ecosystems

Each year, the world’s forests absorb roughly 15.6 billion tonnes of carbon dioxide (CO2).

To put it in perspective, that’s around three times the annual CO2 emissions of the U.S. or about 40% of global CO2 emissions. For this reason, forests serve as a vital tool in regulating the global temperature and achieving net-zero emissions by 2050.

In this graphic sponsored by Carbon Streaming Corporation, we look at the Earth’s natural carbon sinks, and break down their carbon storage.

Carbon Storage by Ecosystem

Forests contain several carbon sinks, from living biomass such as roots and leaves to soil. In fact, soil contains nearly twice as much carbon than the atmosphere, plant, and animal life combined.

  • Soil: 2,500 gigatonnes (Gt)
  • Atmosphere: 800 Gt
  • Plant & animal life: 560 Gt

The soil type, vegetation, and climate all affect how carbon is stored. For example, colder and wetter climates promote the most effective carbon storage in soil.

Global Carbon Storage* (Tonnes of carbon per hectare)Vegetation Soil
Wetlands43643
Boreal forests64344
Temperate grasslands7236
Tundra6127
Tropical forests120123
Tropical savannas29117
Temperate forests5796
Croplands280
Deserts and semideserts
242

*Average stored carbon in tonnes per hectare at a ground depth of one meter
Source: IPCC

Wetlands are substantial reservoirs of carbon. Despite occupying only 5-8% of the Earth’s land surface, they hold between 20 to 30% of all estimated organic soil carbon.

Risks to Natural Carbon Sinks

Around 8.1 billion tonnes of CO2 leaks back into the atmosphere each year.

Over the last 20 years, the world has lost about 10% of its tree cover, or 411 million hectares (Mha). The main causes behind this are forestry (119 Mha), commodity-driven deforestation (103 Mha), and wildfires (89 Mha). What’s more, research suggests that Amazon rainforests emit more carbon than they absorb due to record levels of fires, many of which are deliberately set to clear for commodity production.

With the increasing frequency of wildfires and deforestation, the world’s forests are at risk of releasing carbon. Protecting and preserving these biomes is critical to the Earth’s carbon balance and mitigating climate change.

Carbon Credits Provide a Solution

Given the risk of losing critical carbon sinks, carbon credits play an important role in preserving these ecosystems.

Carbon credits can help finance projects that reduce or remove GHG emissions from the atmosphere. From improved forest management to reforestation, there are a number of different types of carbon projects across wetlands, grasslands, and various forests:

  • Reforestation and Afforestation
  • Avoided Deforestation
  • Natural forest management
  • Wetland restoration

For instance, a carbon credit project may preserve endangered tropical lowland peat swamp forests spanning thousands of hectares, such as the Rimba Raya Biodiversity Reserve Project in Indonesia, one of the projects that Carbon Streaming has a carbon credit stream.

Through this project, forests are prevented from being converted into palm oil plantations to reduce and avoid 130 million tonnes of GHG emissions during the 30 years of the project.

Another example would be the Cerrado Biome Project in Brazil, another carbon offset project where Carbon Streaming has a stream agreement. This project is protecting and preserving native forests and grasslands from being converted to commercial agriculture.

Importantly, these projects would not be economically viable without the sale of carbon credits.

Protecting Stored Carbon

To prevent further loss of stored carbon, government policies, NGO-led initiatives, and the financing of carbon offset projects are gaining momentum. Taken together, they offer the critical intervention needed to preserve the earth’s carbon vaults.

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