Opinion: Elon's Crypto Power-Play
Is Musk playing 4D chess with cryptocurrency? Probably not... but maybe.
Cryptocurrency is, relatively speaking, a new technology. As such, the market for it is volatile and subject to huge swings when news breaks or public opinions change. Such was the apparent case over the past 2 weeks when Tesla CEO Elon Musk broke the news that the electric car company would stop accepting Bitcoin, citing concerns about energy use and sourcing. This was a complete reverse-course for Tesla after announcing they would accept BTC only a little over a month prior (which sent the price of BTC and other cryptos soaring).
Shortly after Musk’s announcement that Tesla would no longer be accepting the increasingly popular crypto for their cars, Bitcoin and the entire cryptocurrency market took a nose-dive. Now, nearly 2 weeks later, the market seems to have found a new floor and is undergoing a slow recovery; and with it, new news from Musk.
Some of the largest Bitcoin mining firms in North America have met with Musk and MicroStrategy CEO Michael Saylor and agreed to form an independent council to address energy consumption and sustainability concerns as well as generate reports for public release to increase industry transparency. This may prove to be a massively positive development for cryptocurrency as a technology, and this whole insane ride may have been Musk’s plan to get it going; if you believe he is a 4D chess playing mad genius…
Besides being new tech, the crypto market suffers from a few key weaknesses that all interplay:
1) It has an image problem. Cryptos are often seen as being a fad, a Ponzi-scheme, as somehow nefarious (as if only criminals use them), or as being too expensive/volatile/difficult for everyday people to get involved in. It is my opinion that much of this negativity comes from ignorance; cryptocurrencies are complicated and people are busy with their lives, so they just don’t know much outside of the rumor mill. Regardless of why this is the case, it presents a hurdle for cryptos to overcome in order to see widespread adoption.
2) Cryptos use a lot of energy to run and require a massive up-scaling of infrastructure to grow into their potential market cap; and hence a massive up-scaling of energy consumption, which is unpopular and plays into problem 1; especially given the current political climate. Which ties into the third problem.
3) Threat of government regulation is a huge concern; and not just in North America. China and India have been particularly harsh towards cryptocurrencies, and they have repeatedly cited energy consumption concerns as justification. With global economic instability and climate change activism at a high, politicians are looking for new tax sources and targets to smear for virtue points. Sadly, cryptos are prime for legislation; and that decreases market confidence because everything could suddenly change due to government interference.
However, Musk may have influenced the market to address these concerns sooner rather than later. The pushback to Elon’s tweet about energy consumption was big. It brought to the front recent studies that suggest cryptos run largely on renewables and have a lesser carbon footprint then traditional currencies; this could be a huge PR win for the crypto market in general. Cryptos are getting a lot of attention, due in large part to Musk’s regular tweeting and public statements, and every bit of positive information that gets into the public consciousness will increase opinion and adoption rates.
Additionally, the formation of an independent council of mining firms focused on addressing energy consumptions and sustainability issues may help to further increase public opinion and awareness, as well as ward off some attempts at government regulation to appease/take advantage of climate activists. With companies being pressured to adopt renewable sources and report how much energy they consume along with how much of it comes from renewable sources, the industry will have the incentive to innovate and the public will have the chance to adopt a new primary narrative that could greatly boost adoption rates; Cryptos are more sustainable then physical fiat currency, and have the potential to be carbon neutral.
-JB
Well done!
I love Elon, but seeing him (imo) manipulate crypto markets for potential gains hurts a bit.