Bull runs are like wildfires: they need a combination of conditions to get started.
A wildfire needs a long period of no rain, high temperatures and then high winds at the point of ignition.
Yes - wildfires have been exacerbated by record methane emissions that Bitcoin helps mitigate, but that’s not what this article’s about: this time it’s just an analogy.
Halvings cause a drying up of new supply of Bitcoin (no rain). They draw increased interest in timing Bitcoin market entry (high temperature). But they also need high winds and an ignition event.
That high wind is the winds of change around the Bitcoin ESG narrative.
The ignition event will be the first large ESG Investment Committee backing Bitcoin for ESG reasons.
The Problem The Soaring Volume Of ESG Investors Have
By 2026, ESG-focused institutional investment will have rocketed to 33.9 trillion dollars. That’s more than more than $1 for every $5 of assets under management according to a PwC report.
But the more important takeaway from the report that should alert Bitcoin hodlers current and future is that right now ESG investors have a problem: demand for solid ESG investment outstrips 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 answer that problem. Here’s why:
The Opportunity For Bitcoin
2023 marked the turning of the tide in the ESG narrative around Bitcoin.
In just 53 halcyon days from Aug 1-Sept 22 this year, five events helped flip the Bitcoin ESG narrative. They were:
1. KPMG Report concludes that Bitcoin supports the ESG imperative (1 Aug)
2. Peer reviewed research supports thesis Bitcoin can be good for environment (8 Aug)
3. Cambridge acknowledges Bitcoin energy overestimation (30 Aug)
4. Bloomberg Intelligence charts show Bitcoin mining leading decarbonization (14 Sept)
5. Institute of Risk Management conclude Bitcoin helps renewable transition (22 Sept)
These reports and papers were produced independently, from highly reputable researchers and organizations, and rather than conclude Bitcoin is “not as bad for the environment as we thought”, they reached the much stronger conclusion that Bitcoin was net positive as an ESG asset.
This wind of change has the potential to intensify into the high wind that Bitcoin needs to complete the set of conditions needed for a bull run.
What This Means
Information is power. Right now, there is an information asymmetry. The narrative has changed based on new data. But most ESG investors don’t have this data. Yet. Until they get this new data, they’ll keep believing the old “Bitcoin is net negative for the environment” narrative.
In case we needed evidence of that, here’s a DM I got from a fund manager just the other day.
This type of ESG investor still cannot deploy a higher percentage into Bitcoin because their ESG information on Bitcoin is several years out of date, and are not yet aware of the five narrative-flipping events described above.
While the Bitcoin-views of ESG Investment Committee members are often strongly negative, it has been my experience that unlike environmental NGOs, their views are also loosely held. When I was in Sydney recently, a young Australian enthusiastically bounded up me and said “Dan - I used your charts to orange-peel our investment commeettee!”
So what will happen when this information asymmetry is blown away by the high winds of the new Bitcoin ESG narrative?
Thanks to Willy Woo’s analysis, we can quantify what that will mean to Bitcoin’s market cap within a range.
Quantifying How ESG = NGU
ESG adoption of Bitcoin is very bullish for Bitcoin’s relatively thimble-sized market of $713Bln at the time of writing. Woo argues that Bitcoin needs to stay above 1 Tr before the institutions that hold the wealth of nation states and/or retirement funds feel comfortable investing in it en masse.
What then would happen to Bitcoin’s market cap if ESG investors deployed 1% of their 2026 AUM (Assets Under Management) into Bitcoin?”
At today’s market-cap-increase-per-dollar-invested ratio – 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 AUM was deployed into Bitcoin, it would increase market cap to $3.87 Trillion. That’s more than 5 times today’s market cap. This puts it squarely on the roadmap for institutional investors, which leads to more capital deployment, which in turn creates a very bullish positive feedback loop.
Even without this feedback loop though, a 2.5% ESG deployment could catalyze a Bitcoin price of around $193,000 during a possible 2026 bear market.
This is not a prediction but a simulation. I am saying if ESG ICs deployed 1-2.5% of AUM, then the consequence for Bitcoin’s market cap could be 2-5x.
That said, Bitcoin has the unique potential of becoming the world’s first Greenhouse Negative industry without offsets: something that would require Bitcoin mining methane mitigation on just 35 mid-sized venting landfills. Should that occur by the aggressive yet possible timeframe of 2026, I would be surprised if Bitcoin did not achieve a 2.5% deployment of ESG investor AUM or greater.
Ignition
As if we needed more confirmation that the winds of ESG narrative change are swirling, recently I spoke at the 2023 Plan₿ Forum in Lugano on the topic “Bitcoin is the World’s best ESG Asset”. I had the idea of using a claim both Michael Saylor and Baseload have previously made, and making it into a keynote backed up with supporting data.
The recording is currently the most watched talk from the 2023 conference on Youtube not because of any great notoriety on my part (there were much better known speakers) but because as Victor Hugo once remarked “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 increase renewable energy capacity and reduce methane emissions at a time when the world urgently needs solutions to both. By contrast, now Ethereum has migrated to Proof of Stake, it can no longer assist with either of these urgent needs.
In early 2022, most Bitcoiners were still trying to “defend” Bitcoin against ESG attacks through me-tooism such as “But Tumble Dryers use more energy than us”. But by 2023, Bitcoiners started taking the game into the opponent’s half, with consistent success. The strategy of sharing fact-based reports and inspiring stories about the positive ESG case for Bitcoin is working: This year both The Hill and Bloomberg began publishing positive press on Bitcoin mining. Positive mainstream news coverage outnumbered negative accounts 4:1. And then of course there were those 53 days of narrative flips.
Every four years, a new false-narrative is hatched.
However, every four years, it’s also “tick tock, next false-narrative for the chopping block.”
The story that Bitcoin “destroys the environment” if not dead, is at least a Nearly Headless Nick.
The approaching halving will further dry up Bitcoin supply while simultaneously heating up investor interest. All the while, the winds of change in the ESG narrative are picking up knots. The conditions are now perfect for the inevitable igniting spark of large ESG fund deployment into Bitcoin.
ESG = NGU.
Daniel Batten is founder of CH4Capital, who provides infrastructure financing to Bitcoin mining companies who are powered by vented methane from landfills.
This is a guest post by Daniel Batten. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Source: Bitcoin Magazine - Bitcoin News, Articles and Expert Insights