Exploring the impact of climate change on traditional and energy cryptocurrencies: A cross-sectional approach

Cryptocurrencies have experienced a dramatic rise in popularity, evolving into major financial instruments. However, this surge has intensified concerns regarding environmental impact, particularly their energy consumption and carbon emissions. Understanding the relationship between environmental factors and cryptocurrency markets has thus become increasingly crucial. This paper investigates how regional and global CO₂ emissions influence the valuation of traditional and environmentally oriented cryptocurrencies. Using cross-sectional OLS regression models, we find that CO₂ emissions and inter-cryptocurrency dynamics significantly affect digital asset prices. Traditional cryptocurrencies like Bitcoin and Ethereum tend to rise with regional emissions but decline with global emissions, suggesting growing environmental concerns. In contrast, energy-focused cryptocurrencies such as Power Ledger and WePower exhibit the opposite pattern. They are negatively affected by regional emissions but positively associated with global emissions. This indicates growing investor interest in sustainable assets as climate awareness increases. These findings highlight the importance of investor sentiment, environmental expectations, and regulatory factors in shaping cryptocurrency markets.