Elon Musk has long been Bitcoin’s most high-profile advocate. His avid support for the crypto-currency has gone a long way toward shifting public perception in favor of Bitcoin and has boosted the asset’s legitimacy in global marketplaces. Bitcoin owes much to Musk for its recent boom and soaring prices as the cryptocurrency enters the mainstream in no small part thanks to the Tesla CEO’s decision to buy $1.5 billion worth of bitcoin through the electric car company and begin accepting the currency as a valid method of payment.
This risky move was just the beginning of what would turn out to be a monthslong rollercoaster of dramatic events and market turmoil for Musk, Tesla, and Bitcoin. First, the bold purchase and very public endorsement of a very volatile cryptocurrency scared off Tesla’s investors in a big way. On the heels of the Bitcoin purchase Tesla’s previously skyrocketing stock prices dropped dramatically, turning the company negative for the year in February.
“This pullback really started after Tesla made the decision to buy $1.5 billion of bitcoin,” New York-based investment research firm CFRA’s Garrett Nelson was quoted by MarketWatch at the time. “Although Tesla used a relatively small percentage of their overall cash to make the purchase, it has investors questioning its future growth strategy.” While the bitcoin purchase paid off for Tesla in the immediate term -- to the tune of about $1 billion in paper profits -- the move married Tesla’s share prices to the value of Bitcoin, both of which took a nosedive soon thereafter.
Then, just last month, Musk did a complete 180 on his long-held loyalty to Bitcoin. The Tesla CEO announced that the electric vehicles company would stop accepting Bitcoin as payment. The reason Musk cited had nothing to do with the cryptocurrency’s notorious volatility, nor his investors’ cold feet, but instead focused on Bitcoin’s significant and growing negative environmental externalities.
The announcement came against the backdrop of increasing scrutiny and criticism of the cryptocurrency’s massive energy consumption and expanding carbon footprint. Some of the vocal critics of Bitcoin and the threat it poses to fighting global warming include none other than that other really, really rich and influential tech guy Bill Gates. "Bitcoin uses more electricity per transaction than any other method known to mankind,” Gates was quoted by the New York Times back in April, a few short weeks before Musk’s about-turn, as part of a high-profile takedown of the crypto-asset.
Indeed, Bitcoin uses more energy each year than many entire countries. At 112.57 Terawatt hours per year, Bitcoin ranks between the Netherlands (110.68 Terawatt hours per year) and the United Arab Emirates (119.45 Terawatt hours per year). Altogether, Bitcoin miners represent a whopping 0.52% of the entire world’s consumption.
As part of Musk’s newfound environmental priorities, he took part in putting together an entirely toothless Bitcoin Mining Council which has given itself the task of improving the cryptocurrency’s sustainability following a meeting between prominent North American Bitcoin miners and Musk. The council is advocating for greater energy usage transparency and campaigning to get miners to switch over to renewable energy sources. Of course, the whole idea of giving recommendations and guidelines centering transparency to a group of people whose sole uniting values are decentralization, autonomy, and anonymity will be a lot like herding anarchist cats. All of which is to say: good luck with that.
Finally, just this week, Musk has thrown more weight with far greater incentive behind the imperative, announcing (on Twitter -- where else?) that Tesla will once again begin to accept Bitcoin payments once the cryptocurrency runs on a rough minimum of 50% clean energy. Bitcoin stock enjoyed a significant boost in the immediate aftermath.
Bitcoin and Musk’s on-again off-again, will they or won’t they romance is sure to enjoy more ups and downs and public volatility for the foreseeable future, so stay tuned. Or direct your attention instead to the more environmentally friendly and even more absurd Muskian protégé Dogecoin, available now in an absurdist Twitter thread near you.
By Haley Zaremba for Oilprice.com
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