Why the reversal of Tesla’s attitude is good for Bitcoin

Tesla’s statement may not be that important, while it does make sense.

Why the reversal of Tesla's attitude is good for Bitcoin

Earlier this week, Tesla announced that it would no longer accept cryptocurrencies as a payment method for its products, exacerbating an already nervous market sentiment.

As usual, the cryptocurrency market is focused on the narrative at hand. If Musk says bitcoin is bad for the environment, other large investors may decide to sell out for fear of public scrutiny, right? The anticipation game, which involves guessing what others think you’re thinking, then makes it wise to reduce your position, regardless of the fundamentals.

While this could be a statement made by Musk without thinking, or his board and executives bowing to external pressure, it’s important to step back and look at the possible motivations and strategies behind this move and what the expected outcome will be.

First, let’s look at why Tesla’s announcement isn’t that important, and then let’s look at why it does make sense.

Tesla announced that it would begin accepting Bitcoin as a payment method in February of this year, along with an announcement of a $1.5 billion investment in Bitcoin. Even at the time, being a payment method seemed like a PR stunt. If bitcoin is a reserve asset used as a hedge against fiat currency devaluation, why would users use it as a payment token?

Many insist that bitcoin is useless as a payment token given its high fees and slow confirmation times. This ignores the fact that in many parts of the world, it is still a better option than the current system. Bitcoin-based payment channels are spreading.

However, for most of Tesla’s target audience, Bitcoin is unlikely to be a better payment option than a direct bank transfer or a platinum credit card. Tesla’s implication that Bitcoin is a good reserve asset and a useful payment method suggests an intellectual disconnect. If Bitcoin is worth holding as a fiat currency devaluation hedge, why should users give it up? Especially if they need to raise money for Tesla and have a lot of idle bitcoin, they can use that cryptocurrency as collateral for a legal loan that can then be used to buy a shiny new car.

In other words, the number of Tesla customers interested in paying in Bitcoin is always small to non-existent. Cancellation as a payment method feels like another PR stunt, and a clumsy one at that. The economic impact of canceling something that almost no one wants is negligible, both for Tesla and for the demand for bitcoin. The reason for this decision was “the rapidly increasing use of fossil fuels in bitcoin mining and trading,” which is actually false, and more detailed information on this is not hard to find. At the same time, Tesla confirmed that it will not sell its current bitcoin holdings.
This move therefore gives the impression that Tesla is both lazy and irresponsible when it comes to research. Tesla’s shareholders have every right to question why the company is only now learning about Bitcoin’s energy consumption structure; second, hypocrisy: why is “tainted” Bitcoin acceptable for balance sheet purposes, but not as a form of payment for users?

As for credibility, when Twitter co-founder Jack Dorsey tweeted last month that “Bitcoin inspires green energy,” Musk responded, “Exactly.” And, you could be in breach of fiduciary duty, something Elon Musk is no stranger to. The price of bitcoin fell nearly 8% in 3 hours after the tweet was posted, causing the market value of Tesla’s bitcoin holdings to plummet. (This does not affect the balance sheet of Bitcoin, which is valued at a lower cost or market value.)

Musk can be irresponsible at times, a risk that Tesla shareholders know and accept. But he’s not stupid at all, so what’s really going on?

I’m not a mind reader, nor do I understand the thought process behind making this statement, but I don’t think it was an impulsive mistake. According to the headline in the “About” section of Tesla’s website, the company’s mission is to “accelerate the world’s transition to sustainable energy. Last week, Tesla entered the S&P 500 ESG Index (up 9.8 percent year to date as of this writing, slightly outpacing the S&P 500), which selects stocks based on their environmental, social and corporate governance scores relative to other stocks in the same industry. Earlier this week, Reuters reported that Tesla is looking to enter the multi-billion dollar U.S. renewable fuel credit market with incredible timing.

So Tesla is investing heavily in sustainable energy and bitcoin. Could we soon see Tesla-branded “green” bitcoin mining? Musk took the bitcoin “bad for the environment” discussion up a notch with the release of his bitcoin payment statement. The massive backlash his tweet received was just the beginning, but with Musk’s tweet and the subsequent price drop, the community will no doubt become more acutely aware that tweeting is not enough, writing a report is not enough, and this conversation needs to escalate to the policy level.

What does that mean? It ranges from financial incentives to increase spending on energy R&D to outright bans on operations unless the energy portfolio meets certain criteria. In addition, there are tools for energy subsidy adjustments. Incentives are usually good, bans not so much, but the goal will be to move mining companies along the energy transition curve. In any case, many companies have been doing this already.

And officials are waking up to the potential of attracting cryptocurrency-related businesses to their areas. In many cases, bitcoin mining can boost activity in struggling economies that have good natural resources but low infrastructure spending. Officials and regulators face tough times when it comes to capitalizing on the opportunities of cryptocurrencies. Many of them remain relatively low on the learning curve. We all know that environmental issues are complex, and that problems are often misunderstood in a way that “simple” solutions are not. Throw in the still controversial notion of a decentralized, self-sovereign currency and you have the considerable challenge of setting social priorities, not to mention protecting them. But the more bitcoin mining is talked about at the policy level, the more “acceptable” it becomes as an industrial activity. Politicians will come to realize that bans will simply shift these activities elsewhere. The more people learn about this possibility, the more politicians will be motivated to propose solutions that will help remove the stigma of pollution. The more the mining industry is involved in the renewable energy sector, the cleaner its image will become, removing a potentially significant barrier to broader investment in the bitcoin market. This is how Tesla’s decision will ultimately help the price of bitcoin: by escalating a much-needed conversation, it will ultimately remove barriers to investment and encourage further development and exploration of the role bitcoin can play in many fundamental areas of society.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-the-reversal-of-teslas-attitude-is-good-for-bitcoin/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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