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Elon Musk Announces BitCoin Reversal

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Perception is Reality and the Perception is Bad

In a sudden about-face Elon Musk announced that Tesla would not accept Bitcoin for its environmentally friendly electric vehicles after all. This, after the company made big news when it purchased $1.5 billion of the cryptocurrency which was revealed in an SEC filing.

In the first quarter report of 2021 the company revealed that it sold a portion of its Bitcoin and netted a $101 million profit. That number represented nearly a fourth of the reported total profits for the quarter.

An even larger contributing factor to the positive news at the time was the massive sales of regulatory credits were $518 million. In other words, profit from Bitcoin and government subsidies was basically 100% of the upside. Car sales, not so much.

Enter the massive media frenzy over the energy use “wasted” on Bitcoin mining and you have a PR disaster waiting to happen for Tesla and Musk. Naturally, clever lad that he is, it was prudent to cancel, at least temporarily the policy of allowing customers to pay with Bitcoin.

Odd thing is, there are many worse things sucking up energy than Bitcoin. And the mining will not stop or slow down because Tesla is not getting any for its cars. But the perception that there’s a “great cost to the environment” from crypto-mining is enough to make this sudden announcement mandatory from a PR standpoint.

Though not mentioned in the tweet where this policy change was announced, it is unlikely that Tesla will go forward with accepting Dogecoin, which was mentioned recently by Musk also, due to the perceived similarities in the mining process.

In the statement attached to Musk’s tweet he also states that they will potentially use a crypto currency if it can be used at an energy cost of less than 1% of Bitcoin per transaction.

This is a separate issue from the mining energy usage but it has also been a criticism that the energy expended to transact using Bitcoin is very high, compared to what is a separate question. Perception is at the root, but wanting more efficient crypto is certainly a laudable goal.

This part of the statement will no doubt lead to feverish speculation as to which cryptocurrency might meet his stated requirements.

Elon Musk’s support for cryptocurrency is, like his commitment to sustainable energy, a positive stance and, before his personal success became completely overblown, a courageous one.

Taking on the fossil fuel industry, it’s easy to forget, was no easy feat in the early days. And, similarly, the inevitable upcoming clash between crypto-adherents and governments (printers of fiat currencies) will need established eminent “super-citizens” to give crypto a chance of survival.

For that reason it is good to see that this does no represent a rejection of crypto itself on Musk’s part, but a necessary response to mounting criticism based on the perception of hypocrisy.

You can bet that, if there is a way to mine with sustainable energy sources (actually in many ways already happening) he will reverse his stance yet again.


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