Bitcoin

Bursting the Elon Bubble: Why Everybody's Mad At Musk

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There’s blood in the streets, and over the weekend, a hero was slain.

The Bitcoin market is on a crazy rollercoaster ride since Tesla chief executive Elon Musk announced in a Tweet on Thursday that the firm would halt Bitcoin payments due to environmental concerns.

Since then, a lot has happened. A lot.

Such as a 25% drop from $59,000, where Bitcoin was trading just a week ago, seemingly about to reclaim its spot in the 60’s. After somewhat consolidating around $49,000 on Saturday, another cryptic Tweet led people to believe Tesla may sell or might have already sold its $1.3 billion worth of bitcoin, resulting in a crash right back down to $42,000 — before yet another Tweet pushed it back above $44,000:

Sounds confusing? Sure is.

Although only a few days old, the news that Tesla would stop accepting bitcoin has grown old pretty quickly and appears to be less of a problem to many people than Musk’s statements surrounding Bitcoin and self-proclaimed meme coin Doge.

So a lot of people are irritated at best, and many even angry with the Tesla chief, for a couple of reasons.

Did Musk Buy Into an Asset He Doesn’t Understand?

Assuming that Musk is not currently pulling off the troll of the year, his statements suggest that Tesla did limited due diligence prior to becoming one of the largest publicly traded Bitcoin HODLers.

Bitcoin’s energy consumption is not news, and between February, when Tesla bought $1.5 billion worth of bitcoin, and today, little has changed. The same applies to Bitcoin’s current state of hash rate distribution, which Musk criticized over the weekend.

The sudden change of tone has had many wondering if not environmental concerns, but external pressure is to blame for Musk’s recent comments.

He Rehashes Old Narratives

While Musk’s initial comment on Bitcoin’s energy consumption picked up an already hot topic and fed a narrative that has been used and reused by various media outlets over the past year, he didn’t stop there.

Aside from advocating for bigger blocks for Dogecoin, Musk also claimed that Bitcoin was “highly centralized” and largely controlled by a handful of mining companies — a perspective that was disproven in the blocksize wars of 2016 and 2017, in which Bitcoin node operators showed that miners do not wield the power to change consensus.

He Doesn't Appear Very Receptive to Criticism

When approached about his controversial comments, Musk showed himself not to be the best sport: in response to a thread published by podcaster Peter McCormack, which listed concerns over Musk’s Dogecoin advocacy and spread of misinformation, the Tesla chef wrote, “obnoxious threads like this make me want to go all in on Doge.”

In an earlier Tweet, Musk fired back against Litecoin developer Loshan, who expressed concerns about the idea that speeding up Doge’s block time ten times, increasing its block size ten times, and lowering its fees 100 times.

“For those bad at math [...] 100X higher transaction volume with 100X lower fees means total fees earned stay same. Low fees & high volume are needed to become currency of Earth,” Musk Tweeted, causing further backlash from Twitter users pointing out the inevitable centralization that would follow such a move.

He's Making His Followers Bet On a Meme Coin

And while none of the aforementioned points appear particularly admirable, this one might be the one that has riled up bitcoiners the most.

There’s no proof that Doge’s meteoric rise from $0.002 to $0.50 since last year can be completely attributed to Musk, but you will find few people disagreeing with you if you hint at that being the case.

What started as a joke endorsement in 2019, when Musk temporarily referred to himself as the “CEO of Doge,” has become a $60 billion-dollar movement, likely largely motivated by his advocacy.

Doge’s mind-boggling surge paired with endorsements from one of the richest people in the world has attracted an army of retail investors who have bought into the asset — and bitcoiners are taking issue with that.

Doge was created in 2013 as a joke to make fun of the increasing cryptocurrency speculation at the time (which pales in comparison to today’s cryptocurrency markets). Unlike many other coins, which promised specific use cases or aspired to topple Bitcoin altogether, Doge never had any such ambitions.

Elon Musk claiming he has been “working with Doge devs to improve system transaction efficiency” when Doge has seen little to no development since 2017 therefore riled up many Twitter users.

Many see Doge’s growth as unsustainable given that it largely hinges on Musk’s support and doesn’t build on any meaningful fundamentals. Any attempt to ‘decentralize’ the network is unlikely to see success either: if Musk ends up pursuing a hard fork with the variables he prefers, the resulting coin will depend on him as a figurehead.

But even his own coin doesn’t appear out of the question for Musk. That such a coin would definitely not be decentralized should be clear.

Where to Next?

As always: up, down, or sideways. From a price perspective, the next few days are incredibly unpredictable, although careful optimism has pushed Bitcoin above $45,000 following Musk’s reassurance that Tesla hasn’t sold its bitcoin holdings.

Notably, the second Musk-motivated crash ‘only’ dragged Bitcoin down around $6,000, as opposed to the previous $10,000 red candle following his Thursday announcement. A possible reason might be that Musk’s Tweet hinting at a potential sale of Tesla’s bitcoin was more cryptic, and many might have believed it to be the result of Musk feeling offended by the backlash he was receiving. It might also simply be an indicator that Bitcoin holders have begun anticipating negative statements from the Tesla chief.

Yet Musk may still have a major impact on the market. As always, what the Tesla CEO does remains unpredictable.

In the long term, however, it’s helpful to take a step back and try to assess the situation from an objective perspective. The chaos of the last few days is entirely centered around the market. The Bitcoin protocol and network are unaffected; the hash rate is near all-time highs, the public node count is unchanged, the majority of the network has signalled support for Taproot.

Yet this weekend likely wasn’t nearly as relaxing as some may have wished.

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Thomas is a journalist at the BTC Times. He enjoys writing about Bitcoin, learning about Bitcoin, and HODLing bitcoin.