Overwhelmed with concerns for climate change, there has been a U-turn made by Tesla on its earlier decision of accepting payment in Bitcoins for its cars purchase and this decision has again come in form of a tweet from CEO Elon Musk.
As was expected as a fall out of tweet, bitcoin value plunged by 10% which also took Tesla shares down into the dip.
Recently, this past March, Tesla expressed willingness in favour of this particular crypto-currency as a mode of payment and the decision drew widespread criticism from environmentalists, which was echoed by investors too.
There was this announcement from electric car maker in February about its mega investment made in this digital currency which was around $1.5 billion.
But, just a few hours ago, today, Tesla withdrew on its earlier commitment and comment.
In words of Mr. Musk, “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel”.
He went on to add, “Cryptocurrency is a good idea… but this cannot come at great cost to the environment.”
Besides, he also clarified that the company would retain all of the Bitcoins it procured in February and it would press those into transactions when mining would be done through sustainable energy.
In view of market analysts, such is the attempt to pacify the concerns and clamour of those investors who are transfixed on climate change and are drawn by sustainability.
Julia Lee who works at Burman Invest said, “Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG.”
She also made an addition, “But a cynic might suggest that this is just another move by Elon Musk to influence the cryptocurrency market, as he has done on so many other occasions”.
>Elon Musk’s Observation And Outlook:
Analysts believe Mr. Musk is well learned about technology and is well aware about the environment too and in an interview to a mega media house, he expressed his ambition, drenched in deep passion, of making transport a sustainable affair in the struggle against “existential threat” of climate change.
Therefore, it raises eye-brows that his knowledge and insight is recently updated about Bitcoin not being a green project as it consumes a lot of electricity in getting generated. Alternative Finance, which is associated with Cambridge University, they operate a Bitcoin Electricity Consumption Index, which revelas about the process of cryptocurrency mining, consuming high degree of computer processing power and utilizing more electricity which even countries like Malaysia and Sweden fall short of using.
Albeit, there has been an emphasis from devotees of bitcoin that renewable energy is roped in during mining process but truth is far from it as they rely upon whatever comes cheaper to them while in China, where majority of miners are located in, coal is the major component of generating electricity.
In February, when announcement centring around the glamorous crypto-currency plans was made and also declared Tesla’s chief financial officer as “Master of Coin”, bitcoin value swelled leaving its fans elated. As of now, on the contrary, popular air is full of anger and angst and cry foul on the part of their bitcoin saviour and asking him reason for betrayal.
Clearly, his move has pushed bitcoin into the limelight and people started considering it as a great means of exchange in mainstream transactions but now, things stand upside down, highlighting its vulnerable volatility.
In April, when Tesla declared its profits covering first three months, they were $438 million which was up from $16 million as recorded last year and this surge is attributed to bitcoin sales and environmental credits.
To propel cryptocurrency ahead, Mr. Musk has been greatly instrumental and through his tweets centring around Bitcoin while also taking Dogecoin into his media fold.
Thanks to his tweets passed on in recent days, Dogecoin today stands as the fourth largest crypto-currency.
Why is the Bitcoin at the centre of environmentalists concerns?
To create a Bitcoin, miners make use of powerful computers and place them in competition to each other in a bid to solve lengthy and complicated mathematical equations.
For sure, this is an energy-intensive process where electricity plays the dominant role which is again generated through fossil fuels, especially coal.
Now, as most of the passionate bitcoin miners are located in China, they enjoy their dominance but also lack intention to replace fossil fuels as the source of energy which is pretty cost-effective, while renewable energy sources comes at a price and in mid of all this, we can easily claim that emission concerns are not likely to be over in coming time.
In fact, as research showcases, China’s share in bitcoin mining is quite hefty standing at around 75%. The carbon footprint originating as a result of crypto-currency generation is pretty broad too, which is around what large Chinese cities emit.
The major reason being that bitcoin miners rely upon electricity, most of the year, which is sourced from fossil fuels, while they turn to renewable energy which is mostly hydropower in rainy season.
Now, those supporting bitcoin, also highlight the fact that in prevailing financial frameworks, such as banks, finance offices, stock exchanges etc. workforce runs in millions who also make use of huge amount of electricity that is again produced by exploiting fossil fuels.