Bitcoin Price Drops After a Tweet from Elon Musk; Tesla Pauses Cryptocurrency Transactions
It appears that Elon Musk is powerful enough to dictate the rise and fall of Bitcoin prices with just a simple tweet. Just three months ago, Musk was singing the praises of cryptocurrency and announced that Tesla has invested US$1.5 billion in it and will even be accepting it as payment for their cars. The news caused the value of Bitcoins to shoot up and continued to climb by up to 20%.
That is, until last Wednesday, when Musk amended his thoughts on cryptocurrency, citing environmental concerns.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Following his announcement that Tesla will no longer be accepting Bitcoin as payment for their cars and neither will they be selling/transacting any of their Bitcoin until mining becomes more sustainable, the price of the digital currency fell by more than 7%. What a difference a tweet makes.
Musk followed with a second tweet, showing electricity consumption for Bitcoin mining skyrocketing in recent months and surpassing the power consumption of a small country:
It’s hard to believe that Musk did not anticipate this when the company made the decision to dip their toe into the cryptocurrency arena – Bitcoin mining being a hungry energy vampire is, after all, not recent news.
If you are wondering what is this business of Bitcoin mining and why is it so “power-hungry”, the simplified explanation is this: creating a new Bitcoin or verifying one is a matter of “solving a puzzle” that is so complex that it takes a lot of juice to power high-level computers to do so. Miners get rewarded in Bitcoins, so understandably there is quite a scramble, not unlike the gold rush of the 1800s, to solve these puzzles.
With the rise of interest in Bitcoin, electricity consumption had followed. The majority of Bitcoin mining takes place in China, where they are still heavily reliant on coal for energy. So, Musk is not wrong. However, one thinks he should also be worried about the sustainability of electric cars, which also use energy from the same sources as Bitcoin mining.