May 17, 2021
Bitcoin has been enjoying a steady rise in value during the past few months, securing its position as the most valuable and in-demand cryptocurrency.
Much of its popularity is owed to business magnate Elon Musk, who has expressed support for the cryptocurrency at various instances, making Bitcoin’s value soar with each mention. Musk’s ultimate sign of support for the cryptocurrency was Tesla’s announcement that it would accept Bitcoin as payment, increasing its value by 14% and further normalizing the use of cryptocurrencies in everyday life.
This development was announced on February 8, and now, only three months later, the decision has been retracted due to the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
The excerpt above is from Elon Musk’s tweet announcing the discontinuation on May 13. He later tweeted in support of a carbon tax and stated his belief in crypto, but not at the expense of the increase of fossil fuel use it’s driving.
Can Bitcoin Triumph Over Environmental Concerns?
Although he was recently found agreeing with Twitter CEO Jack Dorsey that Bitcoin “incentivizes renewable energy”, it seems that Musk’s concerns about Bitcoin’s sustainability have increased.
Environmental impact has been a part of the cryptocurrency discourse for a while. As crypto-mining increases, so does the level of energy consumption needed to power it, making the process increasingly unsustainable and detrimental to the planet.
The discourse around the environmental impact of cryptocurrencies has been around for years, and Musk has been criticized for accepting payments in Bitcoin. So, it’s unknown what prompted this sudden change of heart.
Reason aside, Tesla’s decision caused a steep fall in Bitcoin’s value—from a starting value of $54,800, one token of the cryptocurrency was valued at $46,924 after the announcement. The drop to the lowest value Bitcoin has had in the past three weeks caused some people to sell. Nevertheless, its value has since been recovering and has passed the $50,000 threshold again.
Should Investors Be Worried?
Judging by its quick recovery, it seems that Bitcoin is here to stay. The impact of other cryptocurrencies shouldn’t be underestimated as well, as many of them are gaining traction and getting increasingly mined. Ether seems to be the standout crypto, with some projecting that it will surpass Bitcoin at some point.
Cryptocurrencies have a volatile nature, and steep rises and falls in their value are not a surprising occurrence, just temporary hiccups. If you are an entry-level investor and feel uneasy about the cryptocurrencies’ volatility, you might consider using a robo advisor to guide you through the process.
Even with an impact as significant as Tesla’s recent change of heart, experts don’t believe that Bitcoin will suffer long-term damage, making it a worthy investment still.
In a report following the development, Mike McGlone, a senior commodity strategist at Bloomberg, wrote, “Elon Musk saying Tesla is suspending purchases using Bitcoin doesn’t shake our thesis that the crypto is in early price discovery days on its way to becoming the global digital reserve asset in a world of accelerating digitalization and electrification.”
Whether you agree or disagree with Musk’s decision, Bitcoin trading and mining aren’t slowing down anytime soon, so finding a sustainable mining model is crucial for the stable and safe use of cryptocurrencies.