Cryptocurrencies in a Sustainable Era: Analyzing the Influence of Environmental Innovation and US Stock Indices on Bitcoin and Ethereum Returns

This study examines the joint influence of environmental factors and U.S. financial markets on the returns of Bitcoin (BTC) and Ethereum (ETH), shedding light on sustainability-driven crypto valuation. The analysis integrates CO₂ emissions, green innovations, ESG scores and financial indicators, including the S&P 500, NASDAQ, Dow Jones, gold and oil prices, using monthly data from January 2019 to February 2025. A robust econometric framework is employed to assess both the long-term cointegration and the short-term sensitivities of BTC and ETH returns. The findings suggest that BTC exhibits a strong positive correlation with environmental innovations and ESG scores, indicating an alignment with investors focused on sustainability. In contrast, ETH exhibits weaker sensitivity to environmental factors despite its adoption of a more energy-efficient Proof-of-Stake mechanism. Both cryptocurrencies respond positively to gold and oil prices, reinforcing their potential as alternative hedging assets. By jointly evaluating environmental and financial drivers, this study contributes to the fields of sustainable finance and digital asset research, bridging the gap between ESG studies and cryptocurrency market analysis.