Bullfights are like wildfires: they require a combination of conditions to get going.
A wildfire needs a long period of no rain, high temperatures, and then high winds to the point of ignition.
Yes, wildfires have been exacerbated by record methane emissions that Bitcoin helps mitigate, but that’s not what this article is about: this time it’s just an analogy.
Halvings cause new Bitcoin supply to dry up (no rain). They are generating increased interest in the timing of Bitcoin market entry (high temperature). But they also need strong winds and a triggering event.
This strong wind is the wind of change around the Bitcoin ESG narrative.
The trigger event will be the first major ESG investment committee to support Bitcoin for ESG reasons.
The problem posed by the growing volume of ESG investors
But the most important point of the report that should alert current and future Bitcoin holders is that right now, ESG investors have a problem: demand for strong ESG investments exceeds supply. ESG investors take a long time to find suitable ESG investments, with a very high 30% of investors saying they struggle to find attractive ESG investment opportunities.
Bitcoin is now in pole position to address this problem. Here’s why:
The opportunity for Bitcoin
2023 marked a trend reversal in the ESG discourse around Bitcoin.
In just 53 peaceful days, from August 1 to September 22 of this year, five events helped flip the Bitcoin ESG narrative. They were:
1. KPMG report concludes that Bitcoin supports the ESG imperative (August 1)
2. Peer-reviewed research supports thesis Bitcoin can be good for the environment (August 8)
3. Cambridge recognizes Bitcoin Energy Overestimation (August 30)
4. Bloomberg Intelligence Charts Show Bitcoin Mining Leads Decarbonization (September 14)
5. Risk Management Institute conclude that Bitcoin contributes to the transition to renewable energy (September 22)
These reports and articles were independently produced by highly regarded researchers and organizations, and rather than concluding that Bitcoin is “not as bad for the environment as we thought”, they came to the conclusion much stronger than Bitcoin was net positive as an ESG asset.
This wind of change has the potential to intensify into the strong wind Bitcoin needs to fulfill all of the conditions necessary for a bull run.
What does that mean
Information is power. There is currently an information asymmetry. The narrative has changed based on new data. But most ESG investors don’t have this data. Again. Until they get this new data, they will continue to believe the old narrative that “Bitcoin is net negative for the environment.”
In case we need proof of this, here’s a DM I received from a fund manager the other day.
This type of ESG investor still cannot deploy a higher percentage in Bitcoin because their ESG information on Bitcoin is several years out of date and is not yet aware of the five narrative reversal events described above.
Although ESG investment committee members’ opinions on Bitcoin are often strongly negative, in my experience, unlike environmental NGOs, their opinions are also vaguely shared. When I was in Sydney recently, a young Australian enthusiastically came up to me and said, “Dan, I used your charts to review our investment committee!”
So what will happen when this information asymmetry is swept away by the strong winds of the new Bitcoin ESG narrative?
Thanks to Willy Woo’s analysis, we can quantify what this will mean for Bitcoin’s market cap within a certain range.
Quantifying how ESG = NGU
Bitcoin’s ESG adoption is very bullish for the relatively small Bitcoin market, which stands at $713 billion at the time of writing. Woo argues that Bitcoin must stay above 1 Tr before the institutions that hold nation-state wealth and/or pension funds feel comfortable investing in them en masse.
So what would happen to Bitcoin market cap if ESG investors deployed 1% of their capital 2026 Assets under management (Assets under management) in Bitcoin?
At the current ratio of market cap increase per dollar invested, Bitcoin’s market cap would increase to a healthy $2.26 trillion. That’s more than triple what it is today.
If 2.5% of ESG funds’ assets under management were deployed in Bitcoin, it would increase the market capitalization to $3.87 trillion. This represents more than 5 times the current market capitalization. This puts it directly on the road map of institutional investors, leading to increased capital deployment, which in turn creates a very bullish positive feedback loop.
Even without this feedback loop, a 2.5% ESG rollout could catalyze a Bitcoin price of around $193,000 during a possible bear market in 2026.
This is not a prediction but a simulation. I am saying if ESG CIs deployed 1 to 2.5% of assets under management, SO the consequence for the market capitalization of Bitcoin could be 2 to 5x.
That said, Bitcoin has the unique potential to become the world’s first negative greenhouse industry without offsetting: something that would require methane mitigation from Bitcoin mining on just 35 medium vent dumps. If this happens by 2026, an aggressive but possible timeline, I would be surprised if Bitcoin fails to deploy 2.5% of ESG investors’ assets under management or more.
As if we needed any more confirmation that the tide of ESG discourse change is turning, I recently spoke at Forum Plan₿ 2023 in Lugano on the subject “Bitcoin is the best ESG asset in the world“. I had the idea of using one claim at a time Michael Saylor And Basic load have already been made and make it a keynote speech backed up with supporting data.
The recording is currently the most watched speech of the 2023 conference on Youtube not because of any great notoriety on my part (there were much more well-known speakers) but because like Victor Hugo once said, “Nothing is more powerful than an idea whose time has come.”
Bitcoin as an ESG asset is an idea whose time has come. Bitcoin has now demonstrated its ability to rise renewable energy capacity And reduce methane emissions at a time when the world urgently needs solutions to both problems. On the other hand, now that Ethereum has migrated to Proof of Stake, it can no longer help with any of these urgent needs.
At the start of 2022, most Bitcoiners were still trying to “defend” Bitcoin against ESG attacks via me-tooism like “But tumble dryers use more energy than us.” But in 2023, Bitcoiners began introducing the game into the opponent’s half, with consistent success. The strategy for sharing factual reports and inspiring stories on the positive ESG case for Bitcoin works: this year, both The hill And Bloomberg has started releasing positive press about Bitcoin mining. Positive mainstream news coverage negative counts outnumbered 4:1. And then of course, there were these 53 days of narrative twists and turns.
Every four years, a new false narrative arises.
However, every four years it’s also “tick-tock, next false narrative for the chopping block.”
The story that Bitcoin is “destroying the environment,” if not dead, is at least one Nearly Headless Nick.
The impending halving will further dry up Bitcoin supply while simultaneously piquing investor interest. Meanwhile, the winds of change in the ESG discourse are increasingly felt. Conditions are now perfect for the inevitable spark of deploying a large ESG fund into Bitcoin.
ESG = NGU.
Daniel Batten is the founder of CH4Capitalwhich provides infrastructure funding to Bitcoin mining companies that are powered by methane released from landfills.
This is a guest post by Daniel Batten. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.