Elon Musk Had Wrecked Bitcoin With a Single Tweet

Anupam Chugh

Tesla stops accepting Bitcoin payments due to environmental concerns — and gave us invaluable investing lessons

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Photo by Alexander Shatov on Unsplash. Altered by the author

Elon Musk is unarguably one of the greatest minds on Earth today. He might not have started Tesla but has been a key factor in driving the company’s success.

Yet over the period, he’s got this knack of getting into trouble — especially through his notorious tweets. Tesla private at $420 was perhaps one of his most controversial tweets and actually got him in trouble with the Securities and Exchange Commission (SEC).

Subsequently, he’s been rather careful with tweeting about Tesla considering it’s a publically traded company. Since the start of 2021, Musk has been hyping Dogecoin, the meme cryptocurrency coin which even its creator admits started as a joke.

His tweets have helped in soaring the con’s price by 10000 percent in a matter of few months. Few have become millionaires, while others had their hands burnt. Still today many look up to his doge memes as a way to buy or sell the coin.

But just when his influence over Dogecoin pumps started fizzling down, Tesla announced their $1.5bn cash investment in Bitcoin. Additionally, they’d accepted BTC as a form of payment.

Even from a marketing standpoint, the timing of this move was brilliant. And shrewd too as it came only a month after Musk had termed Bitcoin almost as bs as fiat money which actually caused a dip in its price.

Elon Musk always knows how to surprise us and he showcased by having pulled a trick up his sleeve: Dogecoin was the distraction and Bitcoin was his attraction. Tesla backing it was a great sign of legitimation and institutional adoption.

One could also sense a genuine interest from the world’s richest man(at least at that time) who deemed Bitcoin slightly better than holding cash. This was a bullish sign for the entire cryptocurrency space. Unsurprisingly, the crypto market cap went soaring in the next couple of months.

Fast forward to today and Elon Musk surprised the world once again. And like before, all it took was a single tweet. The summary of the tweet is:

Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.

The screenshot further stated that “Tesla will not be selling any Bitcoin and will intend to use it for transactions once the mining transitions to more sustainable energy. They are also looking to other cryptocurrencies that use less than 1% of Bitcoin’s energy/transaction”.

Despite the inflation fears and rising bond yields, the tweet didn’t stop the deflationary asset from plunging over 15 percent to its March lows in a matter of few hours.

Why Tesla suspending Bitcoin payments is a bizarre move?

The process of Bitcoin mining is certainly an energy-intensive task and there are no second thoughts about that.

However, the whole proof of work mechanism of Bitcoin is what makes it the most secure network that cannot be forged and is resistant to inflation.

Moreover, if one compares its environmental impact to gold mining, Bitcoin is way better. Even paper money that the government prints at will does more harm to the environment.

Just after Musk’s tweet went viral, The proponents of the largest cryptocurrency were quick to clarify the amount of renewable energy used in Bitcoin mining. I’ll just leave a popular response here.

Elon Musk’s subsequent response to his own tweet illustrated how the energy consumption of Bitcoin transactions is high. This is where things start getting a little strange.

It’s hard to imagine the smartest person in the world and the biggest car manufacturing company didn’t realize Bitcoin’s inefficiencies earlier.

Also, a few more reasons why this doesn’t go down well with the masses is due to the odd timing:

  1. The news arrives less than a month after Elon Musk acknowledged Jack Dorsey’s tweet on how Bitcoin actually incentivizes renewable energy.
  2. It also came only a week after Tesla had sold $100m worth of profits from their initial Bitcoin investment.
  3. To top it all, only 24 hours ago, Musk had asked his Twitter followers whether Tesla should accept Doge — shortly after terming Dogecoin a people’s hustle on his SNL stint which caused the coin to slump by 30 percent.

Since the environmental concerns should’ve been well known at the time of investment, Musk’s and Tesla’s move to do a complete U-turn on Bitcoin is totally bizarre, to put it mildly.

Perhaps the board of Tesla must have had a bigger role to play in this decision given how the Tesla stock movement is correlating with Bitcoin lately. Or maybe the Bitcoin payment experiment didn’t really work as well as Tesla would have liked? Very few would know the real truth.

However, an announcement coming from Tesla’s official page would’ve way better than a screenshot on Musk’s Twitter handle. More so, since the Tesla CEO has a history of hyping up cryptocurrencies through his tweets.

What can we learn this?

Bitcoin has been trading sideways for months now with people. Tesla’s suspending the digital coin only makes Bitcoin’s dominance weaker than before.

Regardless, we now know that Elon Musk certainly isn’t Satoshi Nakamoto. And banks would do anything to preserve their monopoly.

But, it’s not the end of the road for cryptocurrency. Bitcoin has passed the test of times by making a comeback every time in the past decade. It’ll still continue to be a significant part of the cryptocurrency space.

At a market cap of $1T, Bitcoin is way bigger than Tesla today. If we look at things from an optimistic angle, perhaps this could be a genius move to pump Ethereum and other altcoins.

Regardless, there are a few invaluable lessons we can take from this chapter:

  • Cryptocurrency is an unregulated space and despite the decentralized aspect, the people with power still hold more control over it. We saw how one man’s tweet was enough to put Bitcoin’s graph on a downward spiral.
  • It’s always better to book some profits. Tesla did. Today we learned why.
  • Bitcoin isn’t a currency and would never be. Everybody perceives it as an investment vehicle. Don’t be emotionally attached to any coin. Even Vitalik Buterin, the Ethereum co-founder pulled off a bazooka(and a generous move) by donating one billion dollars worth of meme coins — that were sent to his wallet by the spin-off coins’ creators.

Thanks for reading.

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