There are indications that advisors are increasingly interested in cryptocurrency. A new Nasdaq== survey of 500 financial advisors suggests that more advisors are considering digital assets.
That’s not just good news in terms of crypto adoption. It’s potentially compelling for another growing investment concept: environmental, social, and governance (ESG) investing. As these two concepts converge, there could be positive implications for exchange traded funds such as the Valkyrie Bitcoin Miners ETF (WGMI).
As has been widely discussed, crypto mining, including that of bitcoin, is energy-intensive, meaning that the endeavor can have negative consequences for the environment. However, bitcoin miners are actively working to embrace renewable energy and reduce their carbon footprints. WGMI is perhaps the premier ETF addressing that theme.
“The bitcoin miners in the WGMI portfolio use approximately 77% renewable energy. These mining companies utilize sources like solar and hydropower. Some miners are very creative, seeking to generate electricity from areas with volcanic energy or even locating mining rigs in oil fields to use natural gas that would otherwise be flared,” according to Valkyrie.
That rate of 77% use of renewable energy is more than double the 31% renewable usage rate across the U.S. In other words, bitcoin holdings — at least a substantial portion of the WGMI portfolio — are taking renewable energy seriously.
That’s to the benefit of both the environment and investors because crypto mining is a cost-intensive endeavor. Fortunately, energy consumption is one of the costs bitcoin miners can control.
“Miners seek to locate operations in areas with extremely low electricity costs. Previously, much of the mining strength was generated through coal-fired power plants in China. Now that miners have left China, there is a global search for cheap power with a newfound desire for using clean energy to power mining rigs,” adds Valkyrie.
Efforts among bitcoin miners to embrace clean energy could enhance the ESG credibility of the group. In turn, that could expand the field of advisors allocating to both digital assets and crypto-correlated stocks.
“Crypto inflows through advisor channels show no signs of stopping, even as advisors grapple with compliance considerations and look for guidance from educational materials from other industry participants, including asset managers and index providers,” according to Nasdaq. “We expect ESG and crypto considerations to converge as investors continue to direct assets into both.”
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