What Is Elon Musk’s Connection with Bitcoin?
Like Elon plucking petals from a tulip, Elon Musk appears to be on a one-man mission to bring Bitcoin down. We’ll guess why he did this in a minute. Let’s first focus on what it does and what that means for Bitcoin.
The current series premiered on January 29, 2021. That day, Elon Musk added the hashtag #Bitcoin to his Twitter bio. Bitcoin skyrocketed from $32,000 to $38,000 on the news. So much for the basics.
In a Clubhouse chat two days later, he described Bitcoin as “a good thing”: “At this point I think bitcoin is a good thing and I’m a bitcoin supporter.”
Then in February, Tesla announced in an SEC filing that the electric car maker had purchased $1.5 billion in Bitcoin. It also announced that it will begin accepting Bitcoin as a form of payment.
Maybe we should have seen the post on the moon at this point. In the following months, Bitcoin rose above $63,000.
In a subsequent tweet, Musk explained his position on crypto: “To be clear, I strongly believe in crypto, but it cannot lead to a massive increase in fossil fuel use, especially coal.”
It seems interesting that a car company committed to clean energy is standing behind a digital asset whose mining consumes more electricity than Argentina. Of course there are valid arguments about the carbon footprint. And many compare Bitcoin’s energy consumption to everything from gold mining to powering Christmas lights.
Still, it cannot be denied that substantial Bitcoin mining is backed by coal. As reported by Fortune, a flood shut down a coal mine in China and shut down a third of Bitcoin’s global computing power.
Many pushed back. Mark Cuban argued that Bitcoin would become the new store of value, replacing gold and shrinking large banks and coin use.
A cryptocurrency that isn’t old enough to last. It may be premature to conclude that it will replace a commodity more than 5,000 years old. And Bitcoin’s function as a currency in any practical sense. Given that he cannot see, one has to wonder how useful it is or will be.
And all of this brings us back to Elon Musk. Now it looks long on Dogecoin and short on Bitcoin. Why did the mind change in Bitcoin?
One of the answers may have influenced the thinking of Tesla’s Board of Directors. The problem here, however, is that the company’s decision to purchase $1.5 billion in tokens earlier this year was undoubtedly communicated to them. So why didn’t they object?
Perhaps Occam’s razor gives the best answer. Musk appreciated that Bitcoin consumes enormous amounts of energy, mostly from coal. At the same time, Bitcoin’s blockchain is incredibly inefficient and its token. It makes it completely useless as a practical currency. The result is a cryptocurrency that is both bad for the environment and virtually useless in any practical application.
What Elon Says
In contrast, other tokens are more efficient in both energy consumption and transaction processing. And advances in blockchain technology can bring even greater efficiency, for example, with Ethereum 2, as we will see. If this explains its reversal in Bitcoin, why has it only been a while now. He does not answer that he has come to these obvious conclusions. He also does not answer whether his next Tweet will once again reverse his stance on Bitcoin.