Reading Time: 6 minutes
Elon Musk, Bitcoin’s biggest ambassador, has just pulled one of the biggest betrayals in cryptocurrency history: Tesla’s no longer supporting the coin in light of sustainability concerns, less than two months after it announced that it’s accepting BTC payments.
Elon Musk And Bitcoin: A Short-Lived Affair
In early March, Musk started hinting at Bitcoin crypto, with a few candid mentions of the cryptocurrency on Twitter. Within a few days, the coin had spiked by $10,000, marking the start of BTC’s explosive rally to the $60,000 line. By the 24th of March, Musk teased followers once again—he announced that Tesla would start accepting Bitcoin payments in the US and that the company won’t be converting its coins to fiat. The news caused a spike in new investors and crypto newcomers pouring into the BTC hype train, eventually giving the coin the leverage to a $64,000 all-time high by mid-April.
Sometime later, Musk shifted gears in support of Dogecoin currency, subsequently pushing the joke coin to jump from $0.06 to $0.3 in one week. It sparked explosive interest in meme coins, bringing up the value of the likes of SHIBA INU (SHIB), another dog-themed crypto that jumped 1,392% in four days.
A (Not So) Sudden Concern For The Environment
In mid-May, Musk changed his mind: Tesla won’t be accepting Bitcoin for payments after all. In a tweet titled “Tesla & Bitcoin,” the billionaire attributed the change of heart to the blockchain’s lack of sustainability, raising concerns over the environment—primarily in fossil fuel and coal use. He reassured that Tesla won’t be selling any of its Bitcoin reserves and that the company intends to open the BTC payment option again after the network transitions to a more sustainable mining model. However, investors were understandably spooked by this major turn of events, forcing Bitcoin to plummet by $17,000 less than ten days after the announcement.
While the news may have been a shocker for most, some have been anticipating this chapter in Musk’s Bitcoin saga. The coin’s lack of sustainability has been at the forefront of the cryptocurrency debate—a stark contrast to the mission of Tesla achieving a sustainable future. Bitcoin and Tesla were never the perfect two, hence why Musk’s actions were still within expectations.
How Bitcoin is Damaging The Environment
Bitcoin’s value proposition is its complete decentralisation—a factor that has allowed peer-to-peer involvement in all of the network’s activities. When this idea was conceived a little over a decade ago, the mysterious Satoshi Nakamoto had likely not considered how blockchain congestion would turn BTC into the most environmentally damaging cryptocurrency in the world.
The main issue lies in the Bitcoin mining process, a method in which anyone can “earn” BTC through the Proof-of-Work algorithm. This operation involves using computer processing power to solve the complex cryptography that protects the network. When a miner successfully unlocks the puzzle, they will have created a new block on the Bitcoin blockchain. However, only the first miner to do so will receive the BTC reward, turning the minefield into a competitive racecourse where only the strongest—represented by powerful ASIC rigs—stand a chance in earning profit.
With BTC on the line, miners aren’t holding back, with full-scale mining operations dedicated to capturing all the new coins entering the market. But that enthusiasm has massive repercussions—Bitcoin mining consumes more power than Norway and Bangladesh together. Concerns about the blockchain’s unsustainability are certainly rational.
The Aftershock of Musk’s Change of Heart
While Tesla’s move not to accept Bitcoin is arguably beneficial for the environment, it’s made an impressive impact on the cryptocurrency market—and now, things aren’t looking good for investors. Musk’s announcement prompted a massive BTC sell-off, wiping off billions of dollars from the crypto market within days. In an industry that heavily follows Bitcoin’s lead, altcoins take part in all the good and the bad—the entire market is now standing on bloody-red negative percentages as the sell-off celebrates its one-week anniversary.
ETH value dipped from a $4,100 high to a disappointing $2,600 in five days. Cardano currency, which had been doing good in the first few days of the sell-off (as it was a running candidate for Musk’s sustainable crypto alternative), is struggling to keep its value up. And while Musk has been hinting at improving Dogecoin (DOGE) for mass adoption, it’s not skyrocketing the same way it did during the billionaire’s first big rollout of DOGE memes on Twitter.
Tesla’s not doing too good, either. Since January of this year, Tesla’s market cap has fallen by $300 billion, primarily incited by Musk’s indecisiveness concerning Bitcoin and his recent streak of manipulating the crypto market.
While Tesla’s adamant about its Bitcoin rejection, it hasn’t completely turned its back from cryptocurrency. Musk has expressed being on the lookout for a sustainable crypto alternative, prompting Cardano to take a stab at the persuasion game. The billionaire hasn’t made a clear-cut choice, but Dogecoin seems to be at the centre of his attention. For now, the crypto market is battling against a sell-off, and Tesla’s trying to recover from five months of losses.