Elon Musk

Cryptocurrencies since their inception have been the subject of many inspiring stories of innovation and success as well as part of many controversies. In the midst of all these, they have gained both critiques and supporters. One of the most prominent supporters has been Elon Musk , the founder and CEO of Tesla Inc. He and many others have lauded cryptocurrencies for their immense potential to disrupt conventional finance, which is not only at the mercy of regulation and state borders but also captured by elite technocrats, who have immense control over the functions of these resources under the garb of stability and security.

In fact, in February 2021, Tesla had announced, that the company has invested 1.5 billion US dollars in Bitcoin. And in the next month, it was announced, that the company will start accepting payments for their products in cryptocurrencies. This immediately translated into greater enthusiasm for buying Bitcoin, as reflected in the transactions on crypto exchanges.

However, on 13th May 2021, the Tesla chief announced through Twitter that, the company will no longer be accepting payments through Bitcoin. He stated, that while he still believes in the many possibilities of the crypto industry, Elon Musk is concerned about the effects of Bitcoin on the environment. Bitcoin, which follows a proof-of-work model for mining tokens, requires huge computing powers. The Bitcoin mines located across the world, to meet the increasing demand has to keep increasing their computing power, which requires, huge amounts of energy. At present, the energy consumed annually to produce crypto is the equal annual energy consumption of the whole of the Netherlands. This has been a bone of contention among many experts and led to the moving of many cryptos like Ethereum towards a proof-of-stake model, which does not rely on heavy computing power to mine new tokens. Experts have also suggested the use of renewable energy instead of coal, as a way of making Bitcoin ‘greener’. But most Bitcoin miners are located in China where they can operate under very few environmental regulations, leading to the increased ecological footprint of this popular crypto token.

Musk’s Cryptocurrency Moves in 2021 

The latest announcement by Elon Musk got heavily reflected in the demand for Bitcoin. The Bitcoin prices fell by 17% from the time of the announcement. Many other major cryptos like Ethereum XRP, Binance were also hit, as a consequence of this announcement. The market capitalization of the whole crypto industry fell from 2.43 trillion dollars to 2.06 trillion, a fall of about 365 billion dollars. Ultimately the markets stabilized at 2.27 trillion dollars at the end of the day.

This has revealed the immense influence Musk has over the crypto sector. And therefore, it is very likely that Musk might be able to use his influence to shift the crypto industry towards a greener model. He is so influential, that his tweet was able to increase the price of Dogecoin, a coin that started as a joke based on a popular meme.

The Lee-side of the Crypto Hype 

The question, therefore, that remains to be asked is, even after this U-turn on Bitcoin, will the crypto world still be rallying around Musk. Many crypto insiders see it with disbelief and disappointment, as they feel that Musk’s claims on the unsustainability of crypto are exaggerated. While some jokingly called it a good buying opportunity, others mentioned how this is driven by pressures from a sustainability lobby, which is ill-informed about crypto.

They said, the energy that goes into mining crypto, has a far lesser footprint than mining gold or powering the banking systems across the world. Therefore, while it is important for crypto to go green, such a drastic step may reduce Musk’s ability to be a part of this change.