Tesla No Longer Accepts Bitcoin for Vehicle Purchase
The founder of electric vehicle manufacturer Tesla has an uncanny ability to pull on the heartstrings of the cryptocurrency world. It was only three months ago when Elon Musk announced that the company he is so deeply involved in had purchased $1.5 million worth of Bitcoin. This announcement caused the price of Bitcoin to leap. Following similar pronouncements, so did the price of Dogecoin.
Last weekend Elon guest-hosted Saturday Night Live. During the program, he admitted that Dogecoin might be a “hustle.” As could be expected, the price tumbled. The price continues to fall after it was revealed that Tesla no longer accepts Bitcoin as a viable currency when buying a Tesla vehicle. At the time of the announcement, Musk said he was becoming very concerned about the ever-increasing use of fossil fuels, especially coal that is used to generate the enormous amount of power needed for mining.
It is not only Musk that has highlighted this problem, activists and journalists have been bringing the problem to the attention of all concerned.
Two-thirds of all Bitcoin Has Been Mined
A full two-thirds of Bitcoin has been mined. The undisputed heart of the mining process is in Inner Mongolia where huge data centers are reliant on electricity which is being generated in coal-fired facilities. Alex Lipton, an expert in crypto says that Bitcoin mining is so linked with coal that whenever there is an accident in a Chinese mine, Bitcoin prices move.
The crypto market is estimated to be $2tn. It is expanding at such a rate that it consumes a huge amount of energy. Bitcoin is the undisputed “King of Crypto,” accounting for half of all crypto. To mine this amount takes as much electricity that was used in the Netherlands two or three years ago. Scientists are warning that this consumption of power threatens the goals set in the Paris Agreement.
Entrepreneur Anthony Scaramucci counters the argument by pointing out that statistics have to be taken into context. Scaramucci notes that traditional finance is also energy-hungry.
It is not only Bitcoin mining that consumes a great deal of energy. It is estimated that some of the Artificial Intelligence processes used by Google search use the same amount of energy that it takes for an aircraft to make a trans-Atlantic flight.
Musk’s concern has highlighted lessons for all investors.
- Environmental, social, and governance concerns cannot be ignored, even those purporting to practice sustainability. ESG (Environment, Social, and Governance) funds have an affinity for Tesla as investors focus on the electric vehicle, ignoring other issues.
Digital transparency enables activists to monitor the activities of companies more than ever before. As ESG risks rarely remain static, trade-offs are often required as the risks shift. When valuing companies, investors need lateral vision.
- Investors only have to keep an eye on the debate surrounding the industry’s carbon footprint to understand the changing landscape. Today, there is a mad scramble going on to tackling Bitcoin’s carbon issues. The Rocky Mountain Institute is a non-profit focused on clean energy. It has recently teamed up with officials from the United Nations and leaders in the fintech industry to explore potential solutions.
One such solution might entail changes to the processes around crypto mining to reduce energy consumption. It was only a week ago when Chia, a crypto that uses less processing power was launched.
- The third point is regulation or the lack of it. The primary reason why Musk can sustain his moniker, “The Wizard of Oz of Crypto” is due to the fact the sector is opaque and unburdened by regulations. The SEC (Securities and Exchange Commission) has taken note of this and is exploring regulations designed to protect investors and prevent fraud.
Which of these and other ideas may work is unclear and debatable. The debate may be that which spurred Musk to tweet, and why the investor Stanley Druckenmiller said it is unclear which of the many cryptocurrencies aim to be dominant.
The fight over green standards may be just what young enthusiasts of crypto need to rally around. If this turns out to be the case, then Musk’s tweet may turn out to be what regulators need to conduct scrutiny, albeit belated, on Chinese mines, both computing and coal.