In a single tweet, Elon Musk made bitcoin go into a free fall. The announcement caused the price of bitcoin drop by more than 10% and the cryptocurrency market to lose $365 billion. Apparently, bitcoin is not green enough. According to Elon, mining Bitcoin uses up too much electricity and that’s bad for our planet. Tesla will no longer accept bitcoin as payment for its cars, saying that it goes against its environmental protection provisions. While the market has slightly recovered since the announcement on Wednesday, it’s still pretty shaken up. Going back in time, in February the price of bitcoin was just over $37,000 when Musk disclosed his company’s $1.5 billion bitcoin investment and his plans to start accepting it as payment for cars. Bitcoin’s price was already on rocket trajectory, but after the announcement, bitcoin and the entire market soared even more, and every media outlet was talking about crypto. Elon tweets and the world listens – the crypto market goes to the moon, or it crashes. He mentions Dogecoin and now we have Dogecoin millionaires. Regardless of Elon’s next move, his recent pullback doesn’t change crypto’s trajectory, as the adoption of bitcoin and cryptocurrencies is continuing to grow. But his move brought to the forefront an ongoing debate about crypto’s environmental impact. What happened is not a bad thing, it could actually push market stakeholders to make crypto’s infrastructure more sustainable.
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After Elon’s announcement on Wednesday night, the price of bitcoin tumbled nearly $9,000 to just over $46,000. Other digital currencies dropped as well. The price of ethereum fell about 12%, to around $3,700.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Did Elon just wake up a few of days ago and realize that bitcoin uses energy? Did he not know this when Tesla bought $1.5 billion worth of bitcoin or announced that it would accept bitcoin as payment for its cars? Does he not know that energy consumption is not equivalent to carbon emissions?
Elon is a smart guy and it is difficult to believe that he and Tesla were not aware of these issues at the start of the year. The fact that Tesla may have already sold its cryptocurrency holdings sounds like he’s been planning this for a while. Yesterday in a twitter exchange he implied that Tesla may sell or already has sold its crypto.
BTW, has anyone actually purchased a Tesla with bitcoin since February? I know a lot of people hodling on to their bitcoin, buying every chance they get. I don’t know anyone that selling it to buy a Tesla. Lets be real…
Bitcoin has a finite supply. Every 10 minutes, miners verify one block of bitcoin transactions. The current reward is 6.25 bitcoins and 900 bitcoins are released into the market every day. More and more bitcoin is purchased by big corporations, institutional investors, and smaller retail buyers. The driving force behind the adoption of cryptocurrency is the belief that it can become a safe place to store cash.
Jerome Powell, the chairman of the Federal Reserve, said in March that he believes there could be value in the FED developing its own digital currency. Earlier this year, Mastercard said it would begin processing bitcoin payments. Square has invested money in bitcoin. Microstrategy has invested in bitcoin. Executives at Fidelity, the mutual fund giant, said they believe bitcoin is past the tipping point, and that adoption will continue. There are a growing number of investment services tied to bitcoin. Since last year, US banks can hold bitcoin for their customers. Big investment banks and financial advisers are mapping out ways for investors to invest easily in cryptocurrencies. Goldman Sachs and Morgan Stanley have also sought ways to allow their wealthy clients to get bitcoin exposure.
There is no turning back regardless of what the Elon’s of the world have to say.
The world already wastes tons of energy on useless activities. Bitcoin mining uses a minuscule amount of world’s energy, and much of the global mining operations are already using renewable energy. Three-quarters of mining operations use some renewable energy and 39% are entirely based on renewable energy, according to Cambridge researchers.
According to the Cambridge Center for Alternative Finance (CCAF), bitcoin currently consumes around 110 terawatt hours per year — 0.55% of global electricity production, or roughly equivalent to the annual energy draw of small countries like Malaysia or Sweden. This certainly sounds like a lot of energy. But how much energy should a monetary system consume?
The latest attempt at a green bitcoin comes from Norway. In March, the country’s second-richest person, Kjell Inge Røkke, launched a new venture called Seetee. In a letter to shareholders, Røkke said the company’s goal is to “establish mining operations that transfer stranded or intermittent electricity without stable demand locally—wind, solar, hydro power— to economic assets that can be used anywhere.” Bitcoin, he writes, is “a load-balancing economic battery, and batteries are essential to the energy transition required to reach the targets of the Paris Agreement.”
So why the change of heart? Why did Elon make a complete reversal in three months?
Because this is exactly what he planned to do from the very start.
When Elon announced his grand plans back in February, he made Tesla’s CFO “Master of Coin” and sparked a surge in the value of bitcoin. But there is certain level of hypocrisy in his recent announcement. If he was actually bothered about the planet, then he would not have ignored the obvious contradiction of a clean carmaker investing in Bitcoin in the first place.
In his statement, Elon said that Tesla was also potentially interested in accepting payments in cryptocurrencies with less than 1% of bitcoin’s energy footprint. In recent months, his tweets helped turn Dogecoin, which was started as a social media joke, into the world’s fifth-largest cryptocurrency. In his recent appearance on Saturday Night Live, Elon declared himself “the Dogefather”, making reference to the currency.
Dogecoin is certainly low-energy, albeit neither scarce nor decentralised. It is possible that Tesla may pivot to dogecoin, as a treasury asset and functional currency to supplement its existing bitcoin holdings. Earlier this week, Elon ran a poll on his Twitter account, asking, “Do you want Tesla to accept doge?” The overwhelming answer from his followers was “yes”. Recently, Elon also said that he might create his own cryptocurrency in the coming future. A Twitter user asked him why is he not creating his own cryptocurrency to which Elon replied: “Only if Doge can’t do it.”
Bitcoin is the top dog among cryptocurrencies, with 42% of total market value. There are numerous alternative coins with far stronger sustainability credentials, including coins like Stellar, Ripple and Cardano. But first-mover advantage still counts for a lot in tech. This is especially true in crypto, where currencies rely heavily on rates of adoption and faith in a product that is only as strong as the collective belief of the user base.
Elon’s recent announcement is a load of something… you fill in the blank. This is not be the first time in the last 12 years of bitcoin’s life, that some kind of “Technoking” thinks he can manipulate it or try to kill it. But in a decentralized world there are no masters or kings… thank you Satoshi!
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