Tesla and Bitcoin: 7 Reasons Why Elon Musk is Wrong
On May 13, Elon Musk tweeted that Tesla will no longer accept Bitcoin (BTC) payments. According to Musk, Bitcoin mining is degrading our environment because of the high amounts of fossil fuels used, especially coal.
Following Musk’s announcement, the price of BTC crashed from $55,000 to below $47,000. However, the coin has since recovered slightly and is now trading around the $50,000 mark.
Staunch Bitcoin supporters have strongly criticised Musk’s abrupt turnaround, stating that the CEO is totally wrong on this issue. Here’s their reasons:
1. Bitcoin mining is adopting renewable energy
Anthony Pompliano, the founder of Morgan Creek Digital, responded to Musk’s news, saying that 75% of Bitcoin mining is carried out using renewable energy sources.
Pompliano’s argument may be based on the 2020 University of Cambridge study that stated 76% of BTC miners used electricity generated from renewable energy sources. The study also indicated that 62% of miners used hydroelectricity, which has very little impact on the environment.
2. BTC mining critics usually point out to China
Critics of Bitcoin mining usually base their argument on China, where two-thirds of the electricity used to mine BTC comes from harmful coal. Most of Tesla’s sales are in the US and Europe where mining is mostly from renewables, so if Elon Musk was being truly ethical he should have banned the use of Bitcoin mined from environment-unfriendly coal and endorsed clean BTC.
3. Musk has earlier endorsed Bitcoin mining
Musk’s recent decision to suspend BTC payments over environmental concerns contradicts his earlier stand in April. On April 21, Musk agreed with a tweet by Square’s Jack Dorsey stating that Bitcoin mining ‘incentivizes renewable energy.’
#bitcoin incentivizes renewable energy https://t.co/KCe5bwdVs4
— jack (@jack) April 21, 2021
Surprisingly, Musk has changed his mind on the matter in less than a month.
4. No incremental energy is used in Bitcoin transactions
Musk’s tweet stated that Tesla was halting BTC payment acceptance because of the ‘increasing use of fossil fuels for Bitcoin mining and transactions.’ According to Michael Saylor, the argument was not credible because energy is only used in Bitcoin mining and not BTC transactions.
“Ironic because no incremental energy is used in a #bitcoin transaction. The energy is used to secure the crypto-asset network, and the net impact on fossil fuel consumption over time will be negative, all things considered,” Saylor tweeted.
Ironic because no incremental energy is used in a #bitcoin transaction. The energy is used to secure the crypto-asset network, and the net impact on fossil fuel consumption over time will be negative, all things considered.
— Michael Saylor (@michael_saylor) May 12, 2021
5. Impact of Tesla vehicles on the environment
The Tesla CEO could also be showing double standards regarding environmental preservation. Tesla lithium battery-powered vehicles have started gaining criticism over the huge environmental damage the mining of lithium entails.
A story in the New York Times revealed that lithium mining was very harmful to the environment, with the demand for lithium expected to increase by 10 times in coming years.
6. Gold mining and banking are not environment friendly
A story on medium in 2019 also suggested that Bitcoin mining caused less damage to the environment than gold and banking. Gold mining and bitcoin both consume energy, but in the case of gold it also leads to direct environmental damage.
7. Seen as market manipulation
Following Musk’s announcement, Twitter was abuzz with claims that he was manipulating the Bitcoin price for his own gains. The main reason why regulators such as the SEC are reluctant to endorse the crypto market fully is price manipulation fears. Musk’s move may hence tighten crypto laws, which could affect the sector.