- Bitcoin: What Elon Musk’s U-Turn On Tesla Payments Means For The Future Of Cryptocurrencies
Just now·3 min read
Tesla’s relationship with cryptocurrencies has been a stop-start roller coaster. In February, the electric vehicle maker announced that it had bought $ 1.5 billion (£ 1.1 billion) of bitcoin and planned to accept cryptocurrency in the future as a means of payment from its customers. The price of the largest cryptocurrency that day jumped from just over $ 39,000 to $ 46,000, hitting an all-time high of nearly $ 65,000 in April and a paper profit of over $ 1 billion for Tesla.
Fast forward a few weeks and the situation has completely changed. The first came in late April with news that Tesla had sold 10% of its holdings in bitcoin, reportedly to prove the digital currency’s liquidity.
And most importantly, Musk has now announced on Twitter that Tesla has suspended purchases using bitcoin amid concerns over the “rapid increase in fossil fuel use “used for cryptocurrency mining. This resulted in a huge sell-off in the cryptocurrency markets, with bitcoin plunging from around $ 55,000 to $ 45,000, before recovering to around $ 50,000 at the time of writing.
Concerns about bitcoin ‘s carbon footprint are hardly new. Its network is protected by “miners” using arrays of supercomputers to compete in games where guess the complex numbers, which use large amounts of electricity. As has been well reported , this is the equivalent use of a medium-sized country . Worse still, much of this mining relies on coal-fired energy in China, although many in the cryptocurrency industry argue that the impact is much more moderate than as suggested.
Either way, it’s hard to believe Musk and Tesla were unaware of these issues earlier this year. And the fact that Tesla still intends to keep bitcoin on its balance sheet makes the announcement even more confusing, both because it seems inconsistent with Musk’s fears about carbon emissions, and because Tesla’s investment could be damaged by the drop in the price of bitcoin. . In fact, the company’s stock price has remained fairly stable since the story broke out.
A rising tide lifts all boats, but the reverse may also be true. The concern for cryptocurrency investors is whether the downward shift in price marks the beginning of the end for bitcoin’s current bull run, which has seen the price rise about five times since October 2020. Entire cryptocurrency market have already declined since Musk’s announcement .
Alternatively, is this simply another of the many historical obstacles in the way as the new currency on the block aspires to become one of the largest in the world? In terms of total aggregate market value, bitcoin is currently just outside the top ten currencies in the world.
The contradiction with bitcoin is that it is a relatively old technology but is still a market leader. Slow, energy inefficient, and often expensive to use.
Crypto investors can take comfort in the fact that Tesla is not selling its bitcoin holdings. At least for the time being, cryptocurrency exchanges will not have to process large sales orders from the largest auto company in the world.
Another thing to note in Musk’s statement is that he said Tesla was also potentially interested in accepting payments in cryptocurrencies with less than 1% of bitcoin’s energy footprint. Musk has previously expressed its apparent affinity for the currency Original joke turned into the top ten of cryptocurrency , dogecoin , declaring “ the Dogefather “ — and referring to the currency in his recent appearance on Saturday Night Live.
Dogecoin is certainly energy-efficient , although it is neither sparse nor decentralized . So it’s possible Tesla could pivot on dogecoin as a treasury asset and functional currency to complement its existing bitcoin holdings . In fact, earlier this week, Musk conducted a poll on his Twitter account , asking, “Do you want Tesla to accept the doge? The overwhelming response of his followers was “yes”.
Whether Musk gives them what they want or endorses some other cryptocurrency like Ethereum or Ripple, all eyes will surely be on him to see what happens next. As for bitcoin , analysts will scour the earnings statements of the largest companies to see if anyone has moved the cryptocurrency into their treasures. This part of the financial world is never short of drama, and there will certainly be more around the corner.
- Date of publication:
- Fri, 06/11/2021 - 07:29
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