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Elon Musk is not the best asset for bitcoin

A change of mind and bitcoin crashes.

To be fair, it is not the opinion of an ordinary person. It’s that of Tesla CEO Elon Musk, a technology pioneer and arguably the most prominent proponent of cryptocurrencies. Their endorsement, primarily through tweets and pranks, has helped propel bitcoin to record highs, as well as its parodic version, dogecoin.

Bitcoin prices soared 20% after Musk added the #bitcoin hashtag to his Twitter bio in January and another 15% two weeks later, when Tesla said he had bought $ 1.5 billion worth of bitcoins and would start. to accept digital currency as a means of payment to purchase their electric cars.

So when Musk took a 180-degree turn on Wednesday and tweeted that Tesla would stop accepting payments in the digital currency because mining the cryptocurrency was damaging the environment, a sharp drop in bitcoin prices was to be expected, which fell by as much as 15. %. A rise primarily driven by tweets gives way to a decline also driven primarily by tweets.

What is a cryptocurrency?

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FOLLOWING

Such abrupt swings show that despite the influx of corporate and institutional interest in bitcoin over the past year, the digital currency is far from the mature asset that its fans claim it to be. It remains an asset for speculation, sensitive to the statements of a single individual.

Musk, an obstacle to the glory of bitcoin

Bitcoin has had a checkered history fraught with booms and busts, and Musk and his legion of followers in the crypto community, who take his tweets at face value, are only undermining the currency’s efforts to gain wider acceptance, in his attempt to revolutionize modern finance.

Musk’s influence on bitcoin should be seen as a warning that the digital currency is not the independent, decentralized, and reliable inflation safeguard, safe-haven, or digital gold that its proponents would like people to accept. In fact, the founder of SpaceX “is like the central banker of cryptocurrencies,” as Tracy Alloway of Bloomberg, which can change trust, often with a single tweet.

Musk’s other spoiled cryptocurrency, dogecoin, is also suffering a similar fate. In recent months, the self-proclaimed “father of dogecoin” has been regularly propping up the digital currency, which started as a social media joke, pushing it to record-high prices, only to be branded last week a mere “scam” in a popular US television comedy show.

Musk’s irresponsible jokes caused retail investors a lot of pain as dogecoin lost a third of its value. After that, as if to make up for his losses, Musk asked his 54.5 million Twitter followers to vote on whether Tesla should accept payments in dogecoin, after SpaceX said it was already doing so. Its fans responded with an overwhelming yes and the dogecoin regained some of the lost ground.

Banks and asset managers considering selling cryptocurrency-related products to their clients may need to include an additional element to their already long list of risk factors: cryptocurrency investments can be subject to extreme risk thanks to tweets or jokes from Musk.

From said to fact

Musk deserves credit for highlighting bitcoin’s huge carbon footprint. A currency that requires more energy than entire countries to continue operating, much of it coming from highly polluting coal, has no right to be the currency of the future. Perhaps Musk’s attack will push bitcoin supporters to seek less energy-intensive mining technologies or greener energy alternatives.

It is not clear, however, what exactly it was that made Musk change his mind. After all, climate change activists have been pointing out bitcoin’s ecological shortcomings for years.

Could it be that Musk has gotten bored with bitcoin, that the digital currency has gotten so big that it’s no longer fun to hold? Lacking the underdog vibe that dogecoin has? Or has the love of the “father of dogecoin” overtaken his fondness for bitcoin? Musk tweeted on Thursday that he was working with dogecoin developers to “improve the efficiency of the system’s transactions” and that the initiative was “potentially promising.”

It is difficult to buy the environmental argument. If Musk was really concerned about the planet, then he wouldn’t have ignored the obvious contradiction of a clean car maker investing in bitcoin in the first place.

By the way, Tesla continues to maintain its investment in bitcoins. The digital currency stored in the Tesla treasury does not make it more environmentally friendly than when it is used for transactions. Not accepting bitcoins is no sacrifice, as few parted with their cryptocurrencies to buy a Tesla. If Bitcoin is dangerous for the environment, then the argument stands.

There seems to be some hypocrisy in Musk’s latest change of mind. Bitcoin fans should look for a more trusted brand ambassador if they want to make their big plans to reform the current financial system come true.

(lgc / rr)

Autor: Ashutosh Pandey

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