(Bloomberg) – When electric carmaker Tesla Inc. said in February that it would invest $ 1.5 billion in bitcoin and that it would also start accepting it as payment, billionaire CEO Elon Musk ignored any comment about the profligate. cryptocurrency power consumption, despite the obvious inconsistency with your company’s green credentials.
Last month, when fellow Bitcoin bulls Jack Dorsey and Cathie Wood endorsed a report claiming that the combination of cryptocurrency mining and renewable energy projects could be good for the environment, Musk praised the article, calling it a “True,” even though his overconfident and optimistic assumptions smelled of “green wash.”
So while it is an encouraging development to see Musk’s latest tweet acknowledging the uncomfortable truth of bitcoin, namely that energy inefficient mining algorithms, by some measures, consume more energy than entire countries, the abruptness with which he changed from opinion is a bit puzzling. Especially for cryptocurrency fans who are hanging on Musk’s every word, and who were affected by the $ 365 billion that disappeared from market value after the billionaire’s decision to stop accepting Bitcoin payments.
Taking the tweet at face value, which could be dangerous with a Pied Piper of Hamelin-style character like Musk, suggests that the alternative energy facts that bitcoiners were bringing into the room were not gaining traction.
Cheap and abundant energy is essential for crypto miners, and coal accounts for about 38% of their supply, according to the Cambridge Center for Alternative Finance. Estimates of the total energy consumption of the bitcoin network vary widely, but in 2019 ranged from 20 to 80 terawatt hours to more than 100 this year. Despite the efforts of celebrity enthusiasts like Dorsey and Wood to push narratives on renewable mining, the laser-eyed crowd never came close to debunking energy concerns.
Musk’s move could also indicate that the Teslas were not flying off the shelves as a result of accepting payment in bitcoin. Another uncomfortable truth about cryptocurrency is that its huge price swings and artificially limited supply make it far better as a tool for speculative hoarding than buying things, which can be a taxable event. In late March, a Tesla representative told CoinDesk that it was unclear if any cars had been purchased using the cryptocurrency. Later, the company revealed that it had made $ 101 million in revenue from the sale of roughly 10% of its own bitcoin holdings.
Tesla’s U-turn also suggests that the hype around the company’s enthusiasm for bitcoin might not have been worth it compared to the questions and doubts from institutional investors paying increasing attention to environmental, social factors. and governance. “Can sustainability investors consider owning crypto-associated companies?” Asked Paul Donovan, an economist at UBS in February. Musk has made the question a little easier to answer, even if he says that Tesla will continue to maintain its own bitcoin stack.
It is perhaps no coincidence that this is happening amid a broader and more evident shift in financial markets. Inflationary fears and bond yields are rising and eating up optimistic investments. The high-tech Nasdaq Stock Index is down this week, Wood’s ARK and Tesla shares have fallen sharply. Bitcoin is still above $ 50,000, but after falling 8% in three days, it is hardly performing as an unbeatable inflation hedge.
Musk has left enough gasoline in the tank to avoid completely abandoning his crypto disciples. By leaving the door open to using tokens that are less wasteful than bitcoin, you are hedging your bets on the future of money and, as a result, you reserve the right to continue browsing the internet. On Tuesday he asked his followers on Twitter whether Tesla should accept the cryptocurrency meme, dogecóin, shortly after calling it a “scam” on Saturday Night Live. Meanwhile, ethereum aims to move away from a mining model based on computer “work” towards one powered by “betting” on existing currencies. There are alternative models.
However, the more Musk mixes sudden changes of opinion with social media memes and comedy, the harder it will be to spot where the future of money ends and the “scam” begins. That could be the heart of the matter.
Original Note: Elon Musk Ignored Bitcoin’s Inconvenient Truth: Lionel Laurent
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