The end of Musk's romance with Bitcoin. Cryptocurrency collapsed after Tesla refused to accept it as payment

Elon Musk's three-month romance with bitcoin ended in a market crash and general disappointment.

The rupture of Elon Musk’s fleeting romance with bitcoin sent the cryptocurrency and all assets associated with it into a deep fall – just like the February announcement of the beginning of this romance made bitcoin rise in price to $50,000 for the first time in history. But Musk has hit a sore point with the rampant growth of energy consumption due to mining: in an environment where investment in assets with a high carbon footprint is becoming obscene, the future of bitcoin looks bleak.

What's happened?

On Thursday night in Moscow, Musk published an announcement that his Tesla was refusing to sell electric cars for bitcoins. He motivated the decision by concern that cryptocurrency mining causes an increase in the consumption of fossil energy sources, and above all the most harmful of them - coal. “Cryptocurrencies are in many ways a good idea, and we think they have a great future. But it shouldn't cost the environment that much," Musk wrote.

Musk accompanied his post with a graph based on the cryptocurrency energy consumption index , which is maintained by scientists at the University of Cambridge. It follows from this that only in the last two years, energy consumption by miners has quadrupled. “The energy consumption trend in recent months is crazy,” Musk wrote.

It’s hard to argue with the founder of Tesla – since 2015, energy consumption for mining has grown 66 times, Citigroup said in an April report. On a global scale, this does not look so threatening - about 0.5% of the world's electricity consumption. But, if you put bitcoin in a number of countries - the largest energy consumers, it has long been in the top thirty.

But for crypto investors who have been losing real money today, this is little consolation. Bitcoin after Musk's statements fell by 15% and now costs $48.9 thousand. His example was followed by other cryptocurrencies and related assets, from the recently listed crypto exchange Coinbase (-10.2%) to Tesla itself (-3%), which owns $1.5 billion worth of bitcoins.

Reaction

Musk's statements caused a storm of emotions among retail crypto investors. “Selfish and soulless, at least suspicious, at most hypocritical,” Bloomberg quotes one of them. The biggest known owners of bitcoin, the billionaire brothers Winklevoss and Mark Cuban, took a less emotional note, tweeting that they continue to believe in the cryptocurrency and advise everyone to buy it. Cryptocurrency fund managers are rightly wondering – did a savvy person like Musk really not know about the environmental impact of mining when he opened the Tesla sale for bitcoins in February?

It will be difficult for Musk to answer the last claim - it was his February announcement that Tesla bought $ 1.5 billion worth of bitcoins and began selling cars for cryptocurrency, which launched the latest bitcoin rally. A week after Musk's announcement, the cryptocurrency exchange rate for the first time in history crossed the $50,000 mark.

What do I get from this?

Sharp jumps in the rate of cryptocurrencies are a common phenomenon for them. “The value of bitcoin is a derivative of the value of the internet. Social media and celebrity cult have and will continue to have a significant effect on him,” philosophically noted Stephen Kelso, an analyst at ITI Capital, in a conversation with Bloomberg. The history of bitcoin has taught crypto investors that the path to mainstream cryptocurrency adoption is fraught with obstacles — but the obstacle Musk has set today may be the biggest one they have ever seen, Anthony Trenchev, managing partner at London-based crypto lending firm Nexo, has suggested.

Cover photo: Vlad Tchompalov/Unsplash