The crypto market crashes when Tesla turns its back on Bitcoin

About three months ago Tesla Inc.’s (NASDAQ: TSLA) Eccentric CEO Elon Musk took everyone by surprise after announcing the company was about to start Accept Bitcoin as a means of payment. Tesla announced in an SEC announcement that Bitcoin worth $ 1.5 billion for “More flexibility to further diversify and maximize the return on our cash.

It turned out to be a brilliant move for Bitcoin and helped cryptocurrency bring Tesla to the battle against mainstream companies such as Visa Inc. (NYSE: V), Square Inc. (NYSE: SQ), PayPal Holdings (NASDAQ: PYPL), which customers can use to conduct transactions in the leading cryptocurrency.

Maybe not so much for Tesla.

Tesla is now making a quick U-turn on Bitcoin, saying the company will no longer accept Bitcoin payments due to Bitcoin’s environmental impact.

“We are concerned about the rapidly increasing use of fossil fuels in Bitcoin mining transactions, particularly coal, which has the worst emissions of any fuel,” said Musk in a tweet.

From a purely investment perspective, Bitcoin was a good investment for Tesla and the company Bitcoin stocks contribute significantly to its bottom line.

However, Tesla is keen to be seen as one of the leading ESG investments, and holding Bitcoin is not going to prevent that from happening.

Bitcoin mining in effect

Since its debut 12 years ago, Bitcoin has been widely condemned for its energy-intensive mining process. About 2.5 years ago Nature climate change, a monthly peer-reviewed scientific journal published by the Nature Publishing Group, warned that Bitcoin mining alone could bring global warming above the catastrophic 2 ° C mark in just 14 years if adoption rates were those correspond to other widely used technologies.

However, since that release, the Bitcoin mining rate has increased by 500%.

On the other side of the spectrum, crypto fans, investors, and speculators see critics screeching about the enormous amounts of energy allegedly consumed by crypto mining and how they are contributing to climate change as pedantic party poopers. For example, Proof-of-Work (PoW) maximalists argue that Bitcoin is the “safest public chain” in terms of hashrate, but deny that Bitcoin is an energy hog.

In the other camp, there are crypto apologists (like CoinShare) who admit that Bitcoin and crypto mining are indeed power-hungry processes, but also claim that most of the energy comes from renewable sources.

You can chalk Mike Colyer, CEO of foundry, as belonging to the latter camp – but with a fresh twist. Foundry is a sister company of the big Bitcoin player Grayscale.

Coyler has told insiders that Bitcoin can actually become a useful bridge if we convert the world to sustainable energy.

According to Coyler, the green energy boom has created oversupply in many areas, making renewable energy companies costly to manage. According to Colyer, locating bitcoin mines near renewable energy projects can help increase that electricity surplus.

More importantly, Coyler argues that such an agreement will allow for faster payback on wind and solar projects, and therefore push clean energy adoption even faster by encouraging infrastructure expansion in regions where it would not previously have been attractive Oversupply.

Bad for the environment

As might be expected, many environmentally conscious analysts are not convinced by Coyler’s proposalH Bank of America analysts point out that the Bitcoin network is now using as much electricity as the Netherlands. In fact, if Bitcoin were a country it would be one of the top 30 power consumers.

BofA commodities strategist Francisco Blanch and colleagues say Bitcoin’s estimated energy consumption has increased by over 200% in the last two years alone, making it a major environmental risk. The Cambridge Bitcoin Power Consumption Index Currently, the energy consumption of the Bitcoin network is a staggering 136.3 TWh per year, or 3.4% of the ~ 4,000 TWh electricity consumption in the US in 2019.

They also shot down one of Coyler’s top selling points: This bitcoin mining can make the energy transition smoother.

Of course, according to Coyler, bitcoin miners will be looking for the cheapest source of energy to maximize their profits – which happens to be renewable energy in countries like North America.

The foundry CEO has a valid point. In the middle of last year, the UAE-based clean energy think tank of the International Renewable Energy Agency (IRENA) reported that more than half of its renewable capacity was added in 2019 lower electricity costs achieved than the cheapest new coal-fired power plants. IRENA goes on to say that replacing the most expensive 500 GW of coal with solar PV and onshore wind would reduce grid costs by up to $ 23 billion each year. Reduction of annual CO2 emissions by around 1.8 gigatons (equivalent to 5% of total global CO2 emissions in 2019) and an investment impulse of USD 940 billion (1% of global GDP).

However, Coyler also neglected to mention this over 65% of bitcoin mining This is happening in China, a country where coal and other fossil fuels are by far the dominant sources of energy.

Two years ago, CoinShares made the controversial claim that the Bitcoin network gets 74.1% of its electricity from renewable sources, making it one of the greenest industries. A. Cambridge University The report differs by pointing out that the majority of Bitcoin mining facilities use renewable energy to some extent, but the average percentage is only 28%.

With a cross section of experts predicting Bitcoin prices will soon surpass the $ 100,000 mark, Bitcoin mining could do much more harm than good to the environment. Christopher Bendiksen, Head of Research at CoinShares, has warned that further price hikes could drive energy consumption up even further:

“We basically don’t know what the price of Bitcoin will be. If the price of Bitcoin increased 10 times, the network’s energy consumption would also increase 10 times.

Bitcoin may not be among the biggest offenders in terms of carbon footprint, but it could be competing for these awards in about a decade, unless the energy transition in countries like China moves much faster.

Which means Elon Musk could be completely justified in his recent decision on Cryptocurrencies that are not referred to as Dogecoin.

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