When Tesla CEO Elon Musk criticized Bitcoin’s energy consumption, the price fell 17 percent, but now Bitcoin has rebounded.
On May 13, Bitcoin fell to $45,600 and now stands at $51,000, having recovered more than half of its losses.
As this drama continues to spread, Cointelegraph considers why, at a fundamental level, Bitcoin is finally able to withstand the actions of a single user – no matter how much influence he or she has.
Proof of Workload Has No Impact
Bitcoin’s proof-of-work (PoW) algorithm pays off over time for miners and investors, as their years of work make the network stronger.
The longer Bitcoin lasts, the less likely it is to be attacked or to see participants leave the Bitcoin network to use another cryptocurrency.
This is exactly why Bitcoin continues to be the cryptocurrency of choice in the competition – as many believe, no cottage coin can “do Bitcoin” like Bitcoin.
For Musk, however, there is another reason why proof of workload matters. Just because a prominent investor changes his mind about the value of bitcoin and causes the price to fall, miners have no additional incentive to exit the network or cash out.
This “network effect” meant that Musk ended up providing good rather than bad publicity for Bitcoin – even the price showed that his words and actions did not change the nature of Bitcoin or its capabilities.
PlanB, creator of the bitcoin price model stock-to-flow, commented on this phenomenon: “Why is proof of workload critical to bitcoin? Because a valid hash (PoW) is how P2P nodes know a block is valid without the need for a server or trusted third party”.
“Without PoW, Bitcoin is dead!”
Bitcoin 7-day average count 1-year chart Source: Blockchain.com
Price Trends Have No Impact
Despite the sudden drop in Bitcoin’s price following Musk’s comments above, Bitcoin’s recent price action says more about its ability to withstand criticism than its susceptibility to influence.
In the event, BTC/USD fell for just two hours before rebounding and holding at a higher price. Not only that, but this drop was also in line with the regular price behavior of the year and did not even violate any long-term price trends.
The 21-week exponential moving average (EMA) is a particularly important feature of the 2020-2021 bull market. Analysts say this level will determine the bottom of prices on the downside – a level that was maintained even during the last bull market in 2017.
This time, Musk likewise failed to overturn the indicator, and bitcoin stopped falling when it hit the 21EMA on the way down, briefly touching a low of $45,650.
BTC/USD one-week chart (Bitstamp) with 21-week exponential moving average Source: Tradingview
Bitcoin’s Energy ‘Depletion’ Has No Impact
As always with Bitcoin, it needs to be viewed over the long term.
Once the dust settles on Musk’s personal energy criticism, the broader “debate” about how environmentally friendly Bitcoin is will continue after him. However, most of the common accusations have long been debunked for their short-sightedness and lack of evidence.
Just last week, MicroStrategy CEO Michael Saylor emphasized in a public interview that claims that bitcoin is “bad” for the environment lack intrinsic value.
In response to Musk, he called Tesla’s decision to stop accepting bitcoin payments “ironic.
“Ironically, no additional energy is used in Bitcoin transactions,” he wrote on Twitter.
“Energy is used to protect the crypto asset network, and all things considered, the net impact on fossil fuel consumption over time will be negative.”
Expanding one’s time horizon is therefore crucial to understanding why Bitcoin is worthwhile. As Saifedean Ammous, author of the best-selling book “The Bitcoin Standard,” often mentions, “low time preference” allows Bitcoin investors to understand that rejecting reliable currencies for environmental reasons, among others, leads to more energy being wasted on unreliable alternatives.
This time, Ammou didn’t beat around the bush.
“Unless you also shift rocket and battery manufacturing to ‘more sustainable energy’ you’ll look like an ignorant hypocrite,” he tweeted. He was referring to Musk’s other company, SpaceX.
“The world needs sound money more than your rockets and government-subsidized electric cars.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/analysis-3-reasons-why-bitcoin-isnt-influenced-by-elon-musk/
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