Bitcoin's Path to Sustainability
Bitcoin’s Path to Sustainability
Responsible investing principles and digital assets
Digital assets and sustainable investing have emerged as two significant megatrends in recent years, with growing institutional interest in both areas. However, Bitcoin, the largest digital asset, faces criticism from climate-focused investors due to its energy-intensive proof-of-work mining process, raising concerns over its environmental impact. In this report, we analyze the Kaiko (previously Vinter) Bitcoin Carbon Credit Index, a benchmark that allocates 80% exposure to Bitcoin and 20% to carbon credit futures.
Part 1: Competitive Analysis
Part 2: Risk-return Metrics
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Pt. 1:Competitive returns
While it underperformed the broader crypto market—tracked by the Kaiko’s (Previously Vinter) Top 5 Layer 1 Market Cap Index (BTC, ETH, SOL, XRP, and BNB)—it outpaced major traditional assets like Gold, U.S. equities, and a carbon credit-only portfolio.
→In 2024, the Bitcoin Carbon simulated portfolio achieved a total return of 93%.
Pt. 2: Risk-return metrics
Bitcoin offers high-beta while carbon allowances offer steady growth over the long term, despite some risks related to implementation and demand.
→ The Bitcoin Carbon Index has consistently lower rolling 60-day volatility versus crypto only portfolios. As times last year it was as much as 10 percentage points lower than the BTC & ETH Index.
Pt. 3: risk-return metrics
The Bitcoin Carbon Index also mitigates downside and risk compared to investing in dual asset indices holding only cryptocurrencies.
→ It’s Sharpe ratio is just less than 2, considerably higher than the BTC & ETH Index. It’s Sortino is also much higher than benchmark indices.