Tesla boss Musk has been in the news a lot lately. He was the richest man on the planet, but then he lost that title as well as his fortune of about $6.2 billion. Four rocket tests of his SpaceX Starship failed, but subsequent launches and landings have been successful. This same type of roller coaster behavior, which may be part of Musk’s nature, has also been witnessed within the crypto asset space.
In February, Tesla allocated $1.5 billion of its balance sheet to Bitcoin. Bitcoin’s price jumped nearly $3,000 within minutes, then spiked 20% within 24 hours. A month later, Tesla decided to accept bitcoin to pay for its electric cars, before Musk changed his mind.
Then there’s the whole Dogecoin (DOGE) story. After Musk helped push the meme crypto asset higher, his performance with his mother on “Saturday Night Live” brought it back down to earth. The self-proclaimed “Dogefather” has since denied any official involvement in the DOGE project.
This article will not focus on the legal aspects of Musk’s actions, which have been covered by law professor and former SEC attorney Marc Powers in his latest opinion piece, where he raises the important question.
“Does Musk have some undisclosed personal or business interest in shouting down BTC and promoting DOGE? Do his tweets contain what some believe is wild speculation about the price of Dogecoin and other crypto assets, which is merely bragging and permissible First Amendment speech, or is it a violation of securities, commodities, consumer or other laws?”
This will also set aside the price volatility caused by Musk’s reckless tweeting and comments to market analysts and pundits. Instead, let’s focus on how all of this is affecting the entire crypto asset space.
- Public Perception
Earlier this month, DOGE surpassed BTC in terms of global public attention. a later survey showed that Americans are more familiar with this meme than they are with ethereum. This result may be troubling to some, as the ethereum ecosystem – which introduced smart contracts and became the fabric of the DeFi space – is certainly more deserving of recognition than a meme.
But looking at the situation from another perspective, people previously unfamiliar with cryptoassets, blockchain technology and DeFi are starting to Google Dogecoin. this may pique their interest and they may delve deeper into the topic, leading to increased awareness, which could lead to a mainstream audience engaging in the cryptoasset space. As Nick Spanos, founder of the New York City Bitcoin Center and Zap Protocol, rightly notes.
“DOGE is a powerful marketing tool that drives attention and adoption of cryptoassets and decentralization as a concept. And in that regard, it is priceless”.
- Energy consumption issues
Tesla’s suspension of support for the purchase of vehicles using BTC is a result of Tesla’s concern about the “rapidly increasing use of fossil fuels, particularly coal, for Bitcoin mining and trading. Sounds reasonable for a company developing electric cars, right?
First of all, the question of whether BTC is a waste of energy is not new, and industry experts have been debating it for some time. Meanwhile, mainstream media outlets like the New York Times, Financial Times, and Bloomberg, pounded headlines about the huge energy drain of crypto assets following Musk’s comments. They referenced Cambridge University’s Bitcoin Power Consumption Index, which currently puts the total electricity used by bitcoin miners worldwide at about 113 megawatt hours per year. But what they don’t mention – intentionally or not – is that the latest research from Cambridge University’s Centre for Alternative Finance says that 39% of all energy consumption used in BTC mining comes from renewable sources.
More interestingly, Galaxy Digital published an article titled “On Bitcoin’s Energy Consumption.” The company estimates that energy consumption in the traditional financial sector is about 260 megawatt hours per year, more than twice that of the bitcoin industry. The estimate comes only from available data, which means it’s fair to say that the actual number is much higher.
Another important note is that in the wake of the new crown explosion and the huge global shift to digitalization, we must place the issue of energy consumption for crypto assets in the context of broader Internet usage. As Travis Nichols, director of media for Greenpeace USA, points out.
“As web services grow and become more complex, the demand for computing power will continue to rise in the coming years, which will require even more energy.”
Separately, billionaire investor and NBA Maverick owner Mark Cuban decided not to withdraw his support for Bitcoin payments, arguing with Musk.
“We know that replacing gold as a store of value will help the environment. Curtailing the use of banks and coins will benefit society and the environment.”
If we go back to Musk’s accusations against Bitcoin, they do have a negative impact on the industry. An environmentally focused bill in New York State, for example, would impose a three-year moratorium on crypto asset mining if it passes the state’s Senate. But as they say, the sky is the limit. By bringing attention to the carbon footprint created by the crypto-asset industry, the industry can move more quickly toward sustainability, as happened with the global pandemic that forced global governments to work on green energy in their new crowns.
Cointelegraph reached out to crypto-asset and blockchain industry experts for their opinions on the following issues What are the implications of these comments from Musk for the crypto-asset space as a whole?
- Alex Wilson, co-founder of The Giving Block.
“Bitcoin has been through worse. In the long term, I don’t think it will have a significant impact. In the short term, I think it hurts investor confidence because it shows how much influence one person can have on short-term price movements. However, if Musk’s tweets are really the only thing driving price movement, that’s a whole different debate.”
- Cristina Dolan, Founder and CEO of InsideChains and Vice Chair of the MIT Enterprise Forum.
“In some ways, Musk seems to enjoy creating controversy, drawing attention to himself with bold business goals and achievements that have attracted him a sizable fan base and, of course, fines for the SEC. The adoption of bitcoin for company funding has caught the attention of many investors, especially after Tesla made $101 million in profits from the sale of its bitcoin. It’s not surprising that Musk scoffed at using bitcoin as an investment after he cashed out and focused on Dogecoin, the descendant of bitcoin, which is used more as a temporary store of value and a method of value transfer.
In 2018 Musk and Tesla reportedly reached an agreement with the SEC to pay half of a $40 million fine each for Musk’s bold tweet about Tesla’s future stock price. This “misleading tweet” caused significant ESG (environmental, social and corporate governance) impacts because Tesla’s stakeholders are the social component of ESG, or “S.” This action also impacted the “G” in ESG because it was a governance issue that required changes at the board level and it caused Tesla’s stock price to plummet 14%. It’s hard to argue that Musk’s behavior was guided by ESG principles. His words about bitcoin and dogcoin may have influenced the market, but there are other factors that could also affect market sentiment. As tax deadlines approach, crypto asset values tend to fall.
In addition, as more institutional money is invested in crypto assets, there may be other traditional macro market drivers at play, such as inflation or the possibility of interest rate hikes on 10-year Treasuries. Bans on bitcoin or crypto assets in places like China and Turkey have not prevented citizens from accessing crypto assets, although these restrictions may now have a greater impact as more institutions participate in crypto assets.
As headlines about Bitcoin and cryptoassets ignite more interest, we will see a combination of emotional reactions to celebrity endorsements, and behavior associated with traditional market behavior. The market’s perception of crypto assets is not based solely on the words or actions of a particular celebrity, but there is an emotional element to all markets. There are a number of different payment networks that currently accept bitcoin payments, and Apple recently released a new effort for an alternative payment partner.
As the crypto asset network continues to grow, DeFi’s momentum doesn’t stop there. Temporary changes in market conditions or prices will not eliminate the impact of Maxwell’s Law on crypto asset networks. There are many levels of crypto-asset innovation that are thriving.”
- Denelle Dixon, CEO and Executive Director, Stellar Development Foundation.
“I think there’s good news and bad news here. On the good side, bringing cryptoassets and blockchain into the mainstream conversation is a positive development and gives all of us in the industry a chance to talk about the real benefits of the technology as well.
On the bad side, more consumers will see the headlines about Bitcoin or Dogecoin and think crypto assets are just highly volatile investments for speculators. So we have to swim against the tide and explain the real valuable uses of Stellar network and other protocols and how they solve the world’s problems. I’d rather focus on the use cases, and that’s what we’ve chosen to talk about.”
7, Diana Barrero Zalles, Director of ESG and Impact, Emergents @ Weild & Co.
The traditional concept of rational, frictionless finance that dominated financial thought in the second half of the 20th century assumed that everyone in the economy was perfectly rational. The concept of efficient markets assumes that all assets are correctly priced at their fundamental value, fully reflecting all public information. Investors cannot “beat the market” by identifying mispriced assets.
In contrast, the origins of behavioral finance can be traced to a 1981 paper by Yale’s Robert Shiller and Nobel laureate, who found that market volatility could be too great and inconsistent with perfectly rational thinking. Since the 1990s, this theory has gained wider acceptance. In the crypto asset market, this has proven psychologically true time and time again. Behavioral finance attempts to make markets rational in the context of irrational investor behavior and management behavior.
The crypto-asset market, which represents a small fraction of the size of the mainstream financial market, still has a lot of room to mature and grow. Irrational investors and decision makers who drive prices based on sentiment and exuberance may create opportunities for more rational investors to take advantage of arbitrage opportunities.”
- John Wu, president of Ava Labs.
“Musk has a flair for the dramatic, but there are certainly fair criticisms and issues that need to be addressed for the Bitcoin ecosystem. Hopefully, there will be more public attention to promoting faster adoption of renewable energy sources and transparency about how these sources are being used today.
When Tesla announced it would accept BTC payments, I was skeptical that it would catch on because Bitcoin transactions are so slow and the tax implications are significant. However in taking this step, Tesla tentatively accepted crypto asset payments and can now explore a network optimized for near instant, low cost and no environmental impact.”
- Mati Greenspan, founder of Quantum Economics.
“Even Larry Fink, CEO of BlackRock, the world’s largest money management firm, has noticed that just a small amount of money can dramatically sway the price of Bitcoin. For Musk, who briefly became the world’s richest man earlier this year, it seems to be about more than just making money. He has found a way to manipulate market sentiment in less than 280 characters. We’ve seen this with Trump as well, but Musk is clearly better at playing this game.”
10, Tim Draper, founder of Draper Associates and Draper Fisher Jurvetson.
“We’ve seen so many ups and downs in the crypto-asset world that we’re somewhat immune to small, one-day news items like Musk’s tweets or previous comments from people like Warren Buffett and Jamie Dimon. Generally, negative comments come from people who have a lot of fiat money and don’t want the system to change. Musk is a little different, he is a change agent. I certainly hope he is not doing this for selfish motives and I like to think of him as a change agent and a hero.
I almost always agree with Musk about his energy statements, but here he gets it wrong. The secondary effects of technology are rarely what they appear to be. The mining industry encourages the use of cheap alternative energy sources. Thanks to miners, we actually find more energy on the planet. Bitcoin uses much less energy than our current system, which cuts down trees and requires huge infrastructure for paper money. How much energy is consumed by banks, buildings, mint, printers, etc. in processing fiat currency?
Fiat currencies are inflationary and encourage wasteful spending. Bitcoin users are holders.
Finally, with companies like OpenNode and Lightning Network, we can have far more transactions per second than the Visa network, and at a fraction of the cost, with almost zero energy cost.
Of course there are coins that are more environmentally friendly. tezos uses pos proofs instead of pow proofs and uses less energy, but all crypto assets are much better than the 200+ currencies we have available.”
11, Wes Levitt, head of strategy at Theta Labs.
“Musk’s tweet and the resulting fallout may have hurt crypto assets in the eyes of some institutional investors. While many investors already think Musk is a bit of a buffoon and don’t make investment decisions based on his opinions, the fact that a single errant tweet can wipe out hundreds of billions of dollars in market capitalization in just a few days raises concerns about the maturity of the crypto asset market.
The whole Dogecoin debacle, in general, didn’t help the image of crypto-assets either. Many see 2021 as the year cryptoassets start to gain mainstream acceptance as an asset class, but seeing a meme dogecoin reach an $80 billion market cap and then collapse by 50% is not ideal for cryptoassets to be taken seriously.
Institutional capital is still moving quickly into cryptoassets and that will continue this year, but the impact of these tweets has certainly led to some tough conversations at the Investment Committee this month. The best thing for those of us in the crypto asset space is to not give Musk or any other individual so much attention and power.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-does-musk-influence-crypto-assets/
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