Elon Musk and Bitcoin Miner say they want to look into the sustainability of cryptocurrencies
Bitcoin prices rose about 4% on Monday afternoon after Elon Musk, CEO of Tesla, announced on Twitter that he was actively debating the sustainability of the digital currency.
Bitcoin mining uses a lot of electricity
The group agreed to form the Bitcoin Mining Council after Michael Sailor, CEO of MicroStrategy, tweeted on Monday that he met with Elon Musk, CEO of Tesla, and “Bitcoin Mining Workers in North America” ​​over the weekend. Initiatives around the world. “
Musk tweeted earlier on the day the group “promised to announce current and planned renewable energies and urged WW miners to do the same”. According to Sailor, the group includes representatives from Argo Blockchain, Blockcap, Core Science, Galaxy Digital, Hive Blockchain Technologies, Hut 8 Mining, Marathon Digital Holdings and Riot Blockchain.
Emails from various companies mentioned by Sailor weren’t immediately returned Monday, but a spokesman for the Milky Way confirmed to Bloomberg that the agent had picked up the call. Several other companies mentioned above have posted their support for the plan on Twitter. Hut 8 Mining confirmed that this was part of Sylore’s discussion, saying it would train on Twitter as “the opportunity and focus of sustainable market development”.
Peter Wall, CEO of Argo Blockchain, tweeted: “As a founding member of the Bitcoin Mining Council, Argo is committed to sustainable mining and more transparency. This is the way! Marathon Okamoto, CEO of Marathon Digital Holdings, tweeted that the company would “contribute to sustainable mining and transparency.”
When Tesla started accepting bitcoins as money for cars in March, Musk changed positions earlier this month to care about the environment. “Cryptocurrency is a good idea on many levels and we think the outlook is good, but it doesn’t pay much for the environment,” Musk said on Twitter. Since then, he has repeatedly focused on the sustainability of cryptocurrencies.
It is estimated that mining bitcoins uses a large amount of electricity and uses the same amount every year as the Netherlands. This contradicts Tesla’s mission to “accelerate the global transition to sustainable energy”. Details of how the miners planned to solve bitcoins’ environmental problem, change the barrier or take carbon removal measures such as large corporations were not available on Monday.
China can ban all Bitcoin mining
The country’s main financial regulator is resource-based.
After a major Chinese regulator announced a strike over the weekend, Bitcoin launched another round of investors, a new tactic in the country’s battle against cryptocurrencies.
The government “will take action against the practices of Bitcoin mining and trading and strictly prevent the transfer of individual risks to society,” said a statement by the Ministry of Finance’s Stability and Development Committee. The committee is chaired by Deputy Prime Minister Liu He, who is President Xi Jinping’s chief economic and financial representative.
Li Yi, a senior fellow at the Shanghai Academy of Social Sciences, told the South China Morning Post that “the statement didn’t leave much room for secret money mining.” “If all mining activities are banned in China, it will be a turning point in the fate of bitcoins as much of the processing power is left out of the picture.”
The Chinese government is not just concerned with financial stability. A comment on the Communist Party’s official media broadcaster, Xinhua, went deep into the government’s position and expressed concern about Bitcoin’s role in money laundering, drug smuggling and smuggling. He also mentioned bitcoins wasting energy. Last week, China warned financial institutions not to get involved in cryptocurrencies or related services.
China isn’t the only country concerned about the role of Bitcoin and other cryptocurrencies in illegal activity. Last weekend, the U.S. Treasury Department announced that companies would need to report cryptocurrency transactions to domestic tax authorities with sales in excess of $ 10,000. “The cryptocurrency has already caused significant identification problems by facilitating illegal activities, including tax evasion,” the Treasury Department said.
Earlier this month, it was reported that three agencies including the U.S. Treasury Department, the Department of Justice and the Commodity Futures Trading Commission were investigating the buildup of cryptocurrencies and were involved in criminal activity. According to Chainalysis’ 2020 report, a significant chunk of the illicit Bitcoin will pave the way for the building to be replaced.
China’s stance on bitcoins comes from the fact that the highest secret cryptocurrency is being screened for a huge carbon footprint. Two weeks later, Elon Musk announced that he would no longer accept bitcoins to buy one of Tesla’s electronic cars.
When Tesla’s Bitcoin Purchase Policy was announced, the Bitcoin Model 3 cost around 400 tons of carbon dioxide, which is only 8.85 tons to build and drive a car in life. When Musk abolished the policy, the decision was apparently influenced by Ars’ reporting, with the model’s bitcoin carbon footprint exceeding 3,500 tons. “We are concerned that the bitcoin will be used to mine and trade bitcoins,” he said on Twitter.
The Bitcoin network requires amazing energy. Today it uses the same energy as the Netherlands to keep its normal operation. This burden should be particularly clear to the Chinese government, as a recent article by Nature Communications estimated that 75% of all bitcoins would be in China.
The combination of the high price of bitcoins and the enormous energy demand has put the miners in an extreme position. Miners in China are gathering in provinces like Inner Mongolia, where cheaper coal mines will benefit more from mining. The size of these facilities reflects how much investors have invested in the project.
At least one mining facility in Inner Mongolia has an output of more than 50 MW. Big business is also emerging in the US In New York, a private equity firm bought and repaired an abandoned power plant just to dig bitcoins. When the data center is completed, 79% of the mining power plant’s capacity or 85 megawatts will be consumed.
China’s warning to Bitcoin miners must bring many operations out of the country. At least one Bitcoin observer hoped the miners would be expelled from China to start operations in Mongolia, Kazakhstan and Afghanistan.
Read: Why are the prices of bitcoins and other cryptocurrencies falling?
The trouble with Bitcoin has surpassed Elon Musk
China’s recent actions have exposed the weakness of cryptocurrencies.
All fashion clothing on the speculative market has its own unique character. Of the economist Irving Fischer, who announced in October 1929 that share prices had reached “something of an eternal high”, he said in July 2007: “As long as there is music” to Charles Prince, CEO of the City Group. It plays, you have to get up and dance. “These people will forever be tied to the bubble that catches them. However, right now, Tesla and SpaceX CEO Elon Musk are the most closely associated people with Bitcoin.
As the Wall Street Journal reported over the weekend, Musk said, “Like it or not, Bitcoin has become the biggest influence.” In January he added “#bitcoin” to his Twitter profile. The following month, Tesla announced it had purchased $ 1.5 billion worth of bitcoins and that electronic vehicles would accept digital payments. However, a few weeks ago, Tesla changed direction by accepting bitcoins, a decision that affects Musk’s environmental concerns.
By some estimates, e-mining new bitcoins will cost more energy than countries like Argentina and the Netherlands.) Many cipher speculators have blamed Musk for the downward pressure that led to panic selling at some point last week. Bitcoin was trading around $ 37,500 on Monday afternoon.
Paying attention to the mask is an interesting story, but the problems the crypto market is facing extend beyond the individual. Put simply, the rise in Bitcoin faces two existential threats: a tightening of monetary policy by the Fed and legal repression by Chinese and other governments trying to protect their own money.
The prospect of a change from the Fed could lead to a further drop in Bitcoin prices. It could be even more dangerous for the government to take joint action to curb the trade and use of bitcoins: it questions the long-term viability of the digital currency.
To see the Fed’s impact on the value of bitcoins, you need to look at the currency’s price chart over the past year. In mid-March of last year, the price of a Bitcoin was under $ 6,000. The Fed then announced a massive incentive to support the economy during the coronation virus.
After the Fed’s move, the price of all risky financial assets has largely risen, with Bitcoin being one of the biggest beneficiaries of the trend. It was trading over $ 30,000 earlier this year. In the classic bubble model, its growth has become self-sufficient as professionals and amateurs step in to invest.
Another factor was the abstract nature of Bitcoin. Since no cash flow is generated, the value of Bitcoin as a fixed asset is largely arbitrary. As a work of art it is worth what people think is worth, as the German bank analyst Marion Labore emphasized in a research report from March 2021, calling it the “Tinkerbell effect”.
Of course, some Bitcoin supporters have argued that the money is new gold that, while having limited profit, offers valuable protection against the collapse of the stock market and other financial assets. More recently, however, Bitcoin has been behaving like dangerous brain activity that declined sharply as bond yields rose, and investors avoided inflation concerns for fear of a change in Fed policy.
Also Read: Bitcoin hits 3-month low, then recovers, in Elon Musk’s tweets
Last week’s failure was due to reports that some Fed policy makers were ready to discuss the central bank’s tightening plan, which was wide open even if the economy recovered. The price of real gold rose when bitcoin prices fell last week.
Even now, long-term bitcoin holders are making huge profits, with some optimists insisting that more institutional investors are accepting cryptocurrencies as a legitimate asset class, and that value will rise again and hit new highs. Last week, a proponent of Bitcoin-managing Ark investments, Wood predicted that the previous price could hit $ 500,000.
“Elon will be back and this will be part of the ecosystem,” he predicted. Musk, on the other hand, posted the fashion of a diamond and a pair of hands on Twitter, suggesting that Tesla had no intention of abandoning its bitcoin investment.
Given the nature of the speculative market and its interest in whip technology that supports bitcoins and other digital currencies, it is inappropriate to speculate. In addition to the potential for a change in US monetary policy, the cryptocurrency is likely to be led by other countries, led by China, to attack Bitcoin, a surge that could pose a threat to competition for government-issued money. Like the renminbi, the euro, and even the dollar, these are also known as child currencies.
If Bitcoin or other digital peer-to-peer currencies find widespread acceptance as a means of payment, it would be a profound development in the global economy. Commercial banks can be withdrawn. Tax regulations can be avoided. The government can lose the ability to track money transfers and money laundering in order to fight taxes and crime.
Earlier last week, the Chinese state-owned financial institution warned Chinese banks against offering customers services such as Bitcoin and other virtual currencies such as trading, storage or acceptance as a means of payment.
“We must take action against Bitcoin mining and trading activities and prevent the spread of personal risk to society as a whole,” the state cabinet and the Chinese cabinet said in a statement over the weekend. This is not a useless threat as the Bitcoin mining system relies on the power of the Chinese power plant. And if China takes action against the Bitcoin, it will take steps to introduce its digital currency and convert it into cash first.
The United States and other western countries have not yet visited China, but their governments are also inactive. Earlier this year, Treasury Secretary Janet Yellen described Bitcoin (correctly) as a “very inefficient way of trading” and stated that it would be used for “equally illicit finance” (equally correct).
(A few weeks ago, when the colonial pipeline that operates the main east coast fuel supply line agreed to pay hackers $ 4.4 million in compensation, he paid bitcoins.) Check out the possibility that the US government follows China’s instructions and issues its own digital currency. “Our priority is to ensure a secure and efficient payment system that benefits American families and businesses while promoting innovation,” said Jerome Powell, chairman of the US Federal Reserve last week.
Powell’s remarks were meticulous. However, it was another straw in the wind. In India, where bitcoin investing is widespread, there have been reports that the government is preparing to restrict access to digital currency. Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, said in some cases that the U.S. government could even ban bitcoins to protect monopolies in the money supply.
Such a development is currently not possible. The final result is still unclear, Musk admitted over the weekend. “The real battle is between Fiat and Chiffre,” he wrote on another Twitter account. Finally, I support the latter. “It was then that we just realized we couldn’t afford to pay for it.“
