Sometimes it seems like bitcoin is worth whatever Tesla founder Elon Musk and star stock picker Cathie Wood say it is. But what happens if they disagree?
A host of crypto assets took a hit yesterday when Musk said the electric car company would stop accepting bitcoin as payment until it is produced using more sustainable sources of energy. “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, and especially coal, which has the worst emissions of any fuel,” Musk said on Twitter. The mercurial entrepreneur said Tesla, which makes a large chunk of its profit from selling carbon tax credits, wouldn’t sell its bitcoin holdings and would investigate other crypto assets that use less energy.
Bitcoin fell about 8% in early morning trading to $52,147, its lowest price on a closing basis since April 26, according to Coindesk data.
Wood and her colleagues, by contrast, wave away the environmental concerns. Wood’s ARK Invest is well known for its major stakes in Tesla, which bought $1.5 billion worth of bitcoin earlier this year, as well as the original crypto asset. The money manager has been steadily accumulating shares in Coinbase since the largest US crypto exchange went public last month, and Tesla is the biggest holding in its flagship exchange traded fund. Wood’s words of confidence in bitcoin appear to have given the virtual asset a boost in the past.
ARK analyst Yassine Elmandrija said in June 2020 that it’s a common myth that bitcoin wastes too much energy. Bitcoin mining requires computers to solve increasingly difficult mathematical calculations that verify transactions on the network and result in bitcoin rewards for the miner. He argued that the bitcoin network, which consumes 184 million gigajoules (GJ) per year in electricity, is more efficient than gold mining at 500 million GJ and traditional banking at 2.34 billion GJ. “The environmental impact of bitcoin mining is di minimis,” Elmandjra wrote. “Renewables, particularly hydroelectric power, accounts for a large percentage of bitcoin’s energy mix.”
Not all experts are convinced, according to a Quartz report on efforts to make bitcoin more green. A Cambridge University study in February concluded that the global network of bitcoin miners sucks about as much electricity annually as the nation of Argentina. The electrical grid will become less carbon-intensive over time, but that green energy could be absorbed by bitcoin, said Alex de Vries, a digital currency economist who authored Mar. 10 article in the journal Joule about bitcoin energy consumption. “Renewable energy that we could have used to clean up the grid will go to bitcoin mining instead,” he said.
In the meantime Square, a payment company founded by bitcoin proponent Jack Dorsey, is planning a $10 million “Bitcoin Clean Energy Investment Initiative” to support green-minded bitcoin companies, but hasn’t named any yet. Norwegian oilfield services billionaire Kjell Inge Røkke, launched a new venture called Seetee that seeks to “establish mining operations that transfer stranded or intermittent electricity without stable demand locally—wind, solar, hydro power—to economic assets that can be used anywhere.”
It’s unclear what changed Musk’s mind about bitcoin’s environmental credentials. For its part, ARK doesn’t appear to be swayed by Musk’s claims. “Stay tuned,” Elmandjra said on Twitter after Musk’s U-turn. “Our research demonstrating that bitcoin is not only shifting towards renewables but also accelerating renewable deployment, is only getting started.”
Tim McDonnell contributed to this story.