Crypto-Mining and Electricity Market Nexus: Assessing the Evidence from the Nordic Electricity Prices

Abstract

This paper examines the the dynamic relationship between the cryptocurrency market, through two major cryptocurrencies namely Bitcoin and Ethereum, and the Nordic electricity market. Specifically, it examines how the two main cryptocurrencies’ prices volatilities affect the Nordic electricity prices. Our analysis is based on daily spot prices from 08 August 2015 to 16 June 2020, using the dynamic conditional correlation DCC-GARCH model. Our results confirm the existence of a medium conditional correlation between cryptocurrencies and Nordic electricity market. Especially at the end of 2018, this correlation is significantly important. During this period, a peak in Ethereum prices was noticed which impact electricity prices via the high demand of power by miners who are attracted by such low prices, in the Nordic region, to increase the profitability of their activity.