Elon Musk, the CEO of Tesla, has announced that the electric vehicle manufacturer no longer accepts bitcoin. Tesla started accepting bitcoins for its car purchases earlier this year. Despite all the hype surrounding these news, tesla was quick to stop accepting bitcoins. Citing environmental concerns, Musk announced that tesla will no longer accept bitcoin. Both decisions had a severe impact on the crypto space.
An unexpected U-Turn
Elon intimated that tesla noted all the environmental concerns surrounding bitcoin. Taking bitcoin mining into consideration, the environmental impact caused by crypto is not small. Massive exploitation of fossil fuels is what is keeping bitcoin functional. The main issue of concern was the use of coal, which is among the worst polluting raw materials on earth, in the industry.
Must further cited data based charts from the University of Cambridge Center for Alternative Finance. The numbers indicated just how much energy large cryptocurrencies like bitcoin hog. In a tweet, Elon referred to the energy usage trends of crypto as 'insane'.
The latest announcement is a sharp contrast from the last time Tesla made their first go at the crypto sector. Just 3 months ago, the firm had started accepting Bitcoin payments and bought a $1.5 billion pile of Bitcoin.
This decision had a significant effect on the general value of Bitcoin, and cryptocurrencies more general. As more investors gained confidence in the growing crypto market the bull run only accelerated.
It came as not surprise that the Tesla CEO chose to denounce Bitcoin. Considering that his organization is built on concepts of environmental sustainability. Tesla has achieved this concept through drastically reduced carbon emissions. Despite that, many question why Tesla was so late to find this out and why did they not think of this earlier?
Expectedly, Bitcoin dropped by over 40% percent to a yearly low following Elon’s tweet.
Elon Is Not Alone
Bitcoin’s energy-intensive mining and transactional needs have led to widespread environmental concerns. Cryptocurrencies which are based on blockchain systems require intense processing power to operate. As most of the worlds power still comes from non renewable sources, the impact is noticeable.
Not long ago, the U.S. Treasure Secretary Janet Yellen issued a warning on bitcoin. She mentioned bitcoins 'extreme inefficiency' in light of the massive power requirements of the crypto.
Expert critics have not been shy to cite the staggering numbers that describe crypto energy consumption. Figures provided by the Cambridge Bitcoin Electricity Consumption index reveal the scale of power bitcoin requires. In general, digital assets account for more power consumption than countries like Sweden or Malaysia.
Further, Carol Alexander, a scholar at the University of Sussex Business School took a swipe at bitcoin. He noted that the energy requirement have been rising significantly over the last few years. The increasing energy requirements are reflected on the crypto’s mining 'difficulty'. Mining 'difficulty' term used to describe the effort required to mine the virtual currency.
At this point it is difficult to give a clear breakdown of the energy sources used by bitcoin mining. Miners are currently being incentivized to employ renewable energy sources.
The sentiment is pegged on current realities. Renewable energy production keeps getting cheaper each year. In China, the Sichuan province has become a hotbed of crypto mining activity due to its relatively cheap electricity and the availability of robust hydroelectric power resources.
Despite Elon musk being correct about his claims, his comments are considered controversial. The fact that a huge company like Tesla did not research such facts before hand raised many suspicions. In the future, as more and more miners switch to renewable sources, Tesla might start accepting crypto again.