Bitcoin price dropped 15% following Elon Musk’s announcement that Tesla will not receive the cryptocurrency due to “the increasing use of fossil fuels for bitcoin mining and transactions.”
In the message, Musk clarified that “cryptocurrency a good idea”, and announced that Tesla “is looking at other cryptocurrencies that use less than 1% of bitcoin’s energy per transaction”.
The market received the news with surprise, as earlier this year Tesla had confirmed that it would accept bitcoin as a form of payment for its vehicles and that itcurrently helds more than $2.5 billion worth of bitcoin.
Despite Elon Musk’s concerns, it’s no secret to anyone in the financial world that bitcoin mining is intense in countries such as China, Venezuela and Iran, which in turn have an energy matrix highly dependent on fossil fuels.
According to Matt Levin, a Bloomberg analyst, “Elon got bored of bitcoin”. Although many speculate that Elon Musk is manipulating the market in his favor, due to his incredible capacity to influence the value of cryptocurrencies, for Levin, Musk got into bitcoin more for public image reasons than anything else.
According to Levin, “He got into cryptocurrency on a whim because it fit with his image of being fun and futuristic and annoying, and then someone explained to him that it doesn’t fit with his image of being good for the environment, and on a whim he decided to cool it on the bitcoin stuff for a while.”
Market manipulation or an impulsive billionaire?
Musk is notorious for communicating his erratic decisions on Twitter and changing his mind in a matter of days. In the past, this behavior got him in trouble with the Securities and Exchange Commission (SEC).
On past occasions, Tesla’s CEO has said he does not respect the SEC, responding to the SEC’s accusations of using his position and influence as a billionaire to move the stock market in his favor.
The situation escalated when the SEC sued Elon Musk over a tweet he made in 2018 where he said he was considering making Tesla a private company again (i.e. not selling stock publicly), and would buy the stock at $420, alluding to the iconic number of 4/20 among the cannabis-consuming population.
Following the announcement the SEC did not hesitate to fine Elon Musk over $20 million for implanting panic in the market, which after Musk’s controversial tweet, naturally led to a rise in Tesla’s share price.
This has not been Elon Musk’s only run-in with the SEC, even during the pandemic several people have accused the entrepreneur of manipulating the stock and cryptocurrency market through his Twitter account, which has a capacity to organize financial euphoria as happened with the case of GameStop‘s stock.
This practice has become habitual for Musk who has recently dedicated flowers to Dogecoin and plans to finance part of his Space X venture with the meme-currency, which has indeed been rising in value partly due to the Tesla CEO’s fondness for it.
Is there anything else behind Musk’s announcement?
Although it is still early to speculate, many people point to the fact that Musk’s announcement regarding bitcoin was somewhat premeditated and soon Tesla will come out with new announcements regarding the cryptocurrency.
Recently Elon Musk endorsed a white paper shared by Twitter CEO and major shareholder of payments firm Square about the potential of Bitcoin miners as key customers for renewables.
When Dorsey tweeted the paper from Square’s crypto spin-off, claiming that “Bitcoin incentivizes renewable energy,” Musk responded in the “true” thread.
“By combining miners with storage and renewable energy projects, we believe it could improve returns for investors and project developers, moving more solar and wind projects into profitable territory,” the paper states.
Will Tesla’s controversial announcement be the prelude to a foray into bitcoin mining by the largest manufacturer of electric cars and solar panels?