- >Elon Musk Announces Tesla Will No Longer Accept Bitcoin
Elon Musk Announces Tesla Will No Longer Accept Bitcoin
It was a total surprise to see Tesla backtrack on accepting payments in Bitcoin on May 12th. Elon Musk released the news in a tweet late on Wednesday, and the market responded accordingly shortly after.
The statement reads that Tesla is “concerned about the rapidly increasing use of fossil fuels”, and thus is concerned about promoting or accepting Bitcoin as payment for Tesla cars. Bitcoin, dropped 15% precipitously, and the rest of the cryptocurrency market followed. However, there is more to this story than what you see on the surface, let’s dig in.
Keegan Francis | May 13, 2021
Watch What they Do, Not What They Say
Tesla didn’t sell any of their Bitcoin, they are only suspending payments. It would be a real show of disapproval for them to exit their still profitable position in BTC. However, they are sticking with it, and intend on re-enabling Bitcoin payments as soon as Bitcoin transitions to more sustainable energy.
What this shows is that they don’t have total disapproval for Bitcoin in general, just where the energy used to run the network comes from. This is important, because it shows that they are still concerned with being aligned with the original company vision. That is, moving the world towards a greener future.
One Man, Too Much Power?
Elon Musk has arguably amassed too much market influence. Although, I immediately retract this statement, because I am fundamentally for free speech and the free market. The free market wouldn’t be very free if we were censoring how people react to the news of one man. Still, I am left to consider just how sane society has become in light of the rise of Dogecoin underneath the hype generated by Elon Musk.
I don’t think high prices built on hype is sustainable, or healthy for the market. There seems to be a lot of weight placed on the words, and actions of Musk. Nonetheless, since December, I have continually been kept on my toes for the latest things to come out of his mouth. It’s almost to the point where I can reliably trade on the words of Elon due to the predictability of how the rest of the world will react.
Rehashing the Bitcoin Environmental Debate
As if this topic hasn’t already been covered by the professionals in the space (like Dan Held and Michael Saylor), we clearly need to be having it again. We’ve written about the Bitcoin environmental debate before as well. There are a number of fallacies that Tesla to this day has fallen prey to. In the tweet, Tesla mentions that they are looking to adopt cryptocurrencies that have a better energy per transaction metric.
The problem is that this is not a proper way to be measuring Bitcoin’s efficiency. The same amount of energy is going to be used by the network, regardless of how many transactions are included in the block. The purpose of the energy use is to produce blocks, and secure the network which produces unbreakable hard money. Processing of transactions is more of a side-effect of block production, rather than the overall purpose.
I do wonder whether or not this is a marketing play by Tesla. If they really were unsatisfied with the energy use of Bitcoin, I think they’d sell their position. Why wouldn’t they? It is currently profitable, even after the 15% drop. Furthermore, it is not like Bitcoin was clean in January, and now it has ramped up the amount of energy supplied by coal. In fact, it is quite the opposite, Bitcoin is becoming more green with each passing day. This is a side-effect of how Bitcoin profitability works.
Miners are only profitable if they keep their electricity costs low. It just so happens that green energy, specifically solar is the cheapest form of energy available on the market today. Not only that, but Bitcoin helps make better use of energy that would otherwise be wasted.
Elon in Trouble with the SEC
On February 25th, news reported that Elon Musk is under investigation by the SEC for his tweets about Dogecoin. It seems like I’m not the only one that thinks that Elon has too much power to move markets.
Apparently this hasn’t stopped him from tweeting about Dogecoin because in April, DOGE grew by a factor of thirty. Not that this is entirely caused by Musk, but he certainly contributed by declaring that DOGE would be the first cryptocurrency on the moon.
No doubt that this latest tweet, among others, will be factored into the SEC case against Musk that he has the power to manipulate markets with his twitter account. This may just lead to the first case of a twitter account led by the SEC.
The Bitcoin Community Responds with Logic and Memes
Regardless of how you feel about the Bitcoin energy debate, it was nice to see all the popular faces of the Bitcoin community chime in on Elon’s tweet.
Even Bitcoin haters like Peter Schiff weighed in with a very insightful comment.
Our personal favourite was a comment from Lolli, a service that offers cashback in Bitcoin for shopping at a range of services. They will be suspending cashback for shopping at Tesla until further notice. They are largely concerned about the ability for the CEO to understand that Bitcoin is mined with mostly renewable energy (est 75%).
Lolli was never actually offering cashback for buying Tesla’s. But we have to give them credit for the creativity of the meme they put together on such short notice.
Bitcoin Stabilizes Quickly as Bulls Buy the Dip
Just as fast as Bitcoin sunk, did Bitcoin manage to recover and stabilize above $50k USD. In earlier market cycles, downswings in the price of Bitcoin were more violent and lasted longer. A regular dip of 25 – 40% would occur with little warning, and it would take months for Bitcoin to recover. This is hardly the situation anymore.
If you were watching the dip take place (like I was, sitting at my computer), then the more it dipped, the more buy orders you saw flood onto the screen. While Bitcoin did touch as low as $46.5k, the bulls seems to be holding the line at $50k. The moral of the story is that the bulls are still very much alive, and ready to capitalize on Elon Musk’s news that seems negative in the moment.