Musk rues Bitcoin’s energy use, triggers a 10% slide

By Angel Broking | Published on 20th May 2021 | 32

Musk rues Bitcoin’s energy use, triggers a 10% slide

Tesla CEO Elon Musk is no stranger to courting controversy on Twitter. On May 1 last year, he took Tesla shareholders by the storm and declared that the “Tesla stock price is too high imo”. Not surprisingly, the stock collapsed and Tesla shareholders wailed at the entrepreneur billionaire soon after.

Yesterday, another of Musk’s tweets sent the cryptocurrency Bitcoin into a spiral; the cryptocurrency lost more than 10% after Musk tweeted that Tesla was not going to accept Bitcoin as payment for its cars.

“We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emission of any fuel.” he tweeted.

This disavowal of the cryptocurrency came a little short of two months after the company started accepting Bitcoin as payment for cars from Tesla’s stable. Other cryptocurrencies like Ethereum took a beating as well before regaining some of the lost ground thanks to buying from Asian investors.

Flip-flops on Bitcoin

Musk in his tweet qualified that he and Tesla believed that cryptocurrency is “a good idea on many levels” and that the phenomenon has “a promising future” but the same cannot come at “a great cost to the environment”.

Musk also said that Tesla will not be selling any Bitcoin and that the company intends to use it as soon as the mining transitions to more sustainable energy. For now, the company is scoping out other cryptocurrencies that use less than 1% of Bitcoin’s energy/transaction.

In February, Tesla had disclosed that it had purchased $1.5 billion of Bitcoin and then in March, the company declared that it is open to accepting Bitcoin as payment for its cars. This move powered a 20% rise of the world’s largest digital currency.

However, the internet was quick to point out the apparent contradiction in Tesla owning sizable holdings in Bitcoin and Musk championing the cause of low-carbon technology.

A little flak, a little flattery for Musk

A few Tesla investors and environmental activists have time and again voiced critical opinions on the manner in which Bitcoin is mined- a complex process that is extremely energy-intensive and requires large stores of fossil fuels, especially coal.

Some investors, while criticising the company for waking up to the ground reality of Bitcoin this late, still expressed relief that Musk had, finally, recognised the detrimental impact of the digital currency. Investors opined that the holding reversal by Tesla will force other companies to revisit their ideas of accepting Bitcoin as payment, adding that the digital currency’s volatility, in any case, precludes it from being adopted for large-scale corporate use.

Other market stakeholders pointed out that this was a smart move on Musk’s end, which allowed him to denounce Bitcoin while still keeping it on Tesla’s balance sheet. Finance academicians, however, expressed worries about the hasty and non-deliberate decision making that is becoming the norm at the higher echelons of Tesla.

It is not clear till now if Tesla has received Bitcoin as payment for any of its cars. Irrespective of the receipt of Bitcoin by Tesla, the company’s CEO remains a strong advocate of cryptocurrencies.

The future of Dogecoin

A day before his tweet sent Bitcoin into a downward spiral; he polled Twitter users on whether Dogecoin should be accepted as payment by Tesla. An overwhelming 78.2% of those polled gave their approval. On Sunday, he tweeted that his rocket company Space X would accept Dogecoin as rightful payment towards the launching of a lunar mission in 2022. Inscrutably, this declaration came hours after he put the cryptocurrency down on the ‘Saturday Night Live’ TV show, where he called the digital currency “a hustle”.

Dogecoin was started as a joke and an amusing alternative of sorts to the formal fiat cryptocurrencies circulating in the markets. Created by two software engineers Billy Markus and Jackson Palmer, the cryptocurrency was so named to mirror an internet meme that showers affection for dogs.

For the longest time, the virtual currency remained low-key till Musk tweeted about it, asking Twitterati to buy it. Over time, Musk has been raving about the digital currency, calling it the “people’s crypto”.  Currently, Dogecoin’s market capitalisation stands at a whopping $91 billion and people are divided right down the middle on the validity and future efficacy of the currency.