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Bitcoin Vs. Elon Musk: Reasons Behind the Mega Crash

bitcoin energy consumption vs elon musk

October 9, 2021 | 

1657 Views | 

Jesus Guzman | 

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Elon Musk, one of the biggest names in business, is at the centre of the crypto market. We are talking from crypto mentions on his social media pages to Tesla accepting bitcoin payments. In early 2021, Tesla announced it would buy $1.5 billion worth of Bitcoin.

The rise of various cryptocurrencies, which include Bitcoin and Dogecoin, is also attributed to Elon Musk.

Elon Musk, one of the biggest names in business, is at the centre of the crypto market. We are talking from crypto mentions on his social media pages to Tesla accepting bitcoin payments. In early 2021, Tesla announced it would buy $1.5 billion worth of Bitcoin.

The rise of various cryptocurrencies, which include Bitcoin and Dogecoin, is also attributed to Elon Musk.

What happened after Tesla bought $1.5 million worth of Bitcoin?

The reason for Tesla's decision to hold Bitcoin was the company's need to create flexibility to diversify and maximise its returns. To this end, the company allowed its customers to make payments for its products with cryptocurrencies, but on a limited basis.

This made Tesla the first car manufacturer to accept digital currencies. Tesla's move naturally had an impact on the development of cryptocurrencies. Moreover, Elon Musk's positive messages and tweets about Bitcoin not only drove up the price of the cryptocurrency but also accelerated its acceptance and use.

Elon Musk's about-face on Bitcoin.

Tesla recently announced that it will no longer accept Bitcoin due to environmental concerns. Note that Bitcoin mining uses electricity from fossil fuels. And when the price of the cryptocurrency rises, consequently, so does the energy consumption.

Miners are motivated to mine more coins when prices rise, leading to further environmental problems. Note that adoption also increases when the price rises.

Was Elon Musk's about-face on Bitcoin the reason for the mega-crash?

After the announcement, there was a sudden drop in the price of cryptocurrencies, and it is obvious that Elon's about-face was the reason. This is not new, as the businessman has triggered price shifts in cryptocurrencies in previous events.

In 2019, for example, Aeon Musk declared that Dogecoin was his favourite cryptocurrency, and that alone was enough to send the price soaring. In a later event, Elon caused the Dogecoin price to skyrocket by simply tweeting the word "Doge".

Earlier this year, Elon Musk again caused the bitcoin price to rise after adding to his Twitter bio.

And that was not all. In February this year, Musk caused the price of another cryptocurrency, Dogecoin, to rise by tweeting that it was the people's cryptocurrency.

An interesting event on Musk's social media was when he asked if Tesla should accept Dogecoin. This was just a day, if not a few hours before he announced that Tesla would not accept BTC.

Looking at Musk's thoughts on the company's acceptance of cryptocurrencies, this should happen. Accepting cryptocurrencies would go against the company's policy on sustainable energy use, as they are quite energy-intensive.

What happened first after this news?

1. The price of Bitcoin fell

Within the first few minutes of Tesla's announcement, the Bitcoin price dropped by 5%. It should be noted that Bitcoin is not the only cryptocurrency affected by this development. Cryptocurrencies such as Dogecoin fell by over 30% within an hour of the announcement.

The total losses for crypto holders and investors amounted to billions of dollars.

2. There was some recovery

About 24 hours after the announcement, the crypto market, whose value had been significantly impacted, began to recover impressively. The minimum price of bitcoin on Wednesday, the day of the announcement, was a minimum of $9000 and a maximum of $46000.

By the middle of Thursday, the price had risen again to $49000. Although the price recovered almost immediately, the announcement was a bottleneck for the cryptocurrency's development. The development was rapid and the digital currency scaled great heights.

After Tesla launched the digital currency, it was only a matter of time before other big companies started knocking on BTC's doors. It was expected that the currency would not only be used as a means of payment, but also as a shop of value.

3. Tesla's withdrawal has not really affected the acceptance of cryptocurrencies

It may come as a surprise that Tesla's withdrawal has not affected Bitcoin's growth trajectory. Prices may have temporarily slumped, but adoption of the asset has continued to accelerate in recent days. There are still a large number of companies supporting cryptocurrencies. Financial service providers, banks and exchanges remain vigilant in helping investors adopt cryptocurrencies.

The development of the crypto market may have slowed down, but the future remains bright.

Tesla will continue to hold the bitcoin it acquired

It looks like the car company does not want to do away with digital currency altogether. Note that the company will continue to hold the digital currency it already owns. But at the same time, the company will consider other crypto options on the market. This time, the company is looking for cryptocurrencies that are more energy efficient.

Tesla likely to accept bitcoin again

As mentioned earlier, Tesla is interested in cryptocurrencies that are green. Musk has already mentioned that Tesla is looking for cryptocurrencies whose transactions consume less energy. This means that if Bitcoin can meet Tesla's sustainability goals, it will once again be accepted as a payment method for Tesla products.

The condition for re-approval is that miners use about 50% clean energy. In addition to the sensible use of clean energy, blockchains should also have positive future projections in terms of energy consumption.

Is sustainable energy use possible when mining cryptocurrencies?

Tesla's CEO does promise to reuse Bitcoin when it goes green, but the big question is whether this is even feasible. It could be possible. There are talks about how mining operations can be run with little need for local energy.

Another possible strategy is to set up mining centres in places that have access to renewable energy. The shift to green energy will also bring challenges. For example, transaction verification may not be possible 24/7.

Conclusion

The about-face is proving to be a temporary inconvenience for Bitcoin. Tesla still has options in the crypto market as there are several other currencies that are climate-friendly.

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