The Selfish Motive Behind Elon Musk’s Attack on Bitcoin
A lot of people have been scratching their heads concerning the reason behind the attack on bitcoin by Elon Musk, which ended up crashing the crypto market.
Musk did some virtue-signaling by suggesting bitcoin was bad for the environment, even though shortly before his bearish tweet he had acquired approximately $1.5 billion in bitcoin. So why did he so quickly and seemingly change his mind? And why did he announce Tesla was no longer going to accept bitcoin as a method of payment?
While citing alleged environmental concerns, without a doubt it had to do with Tesla being able to receive environmental tax credits on its cars and solar products.
Because of the significant sales of these products, it generates a lot of tax credits, which produces an excess that it sells to other automakers.
Last quarter, Tesla earned $518 million in credits, an increase of 46 percent year-over-year. That accounted for about 7 percent of its total revenue. More importantly, the credits brought over 4 times the net profit of $104 million in the quarter. It guides for the credits to generate $1 billion in tax credits within about a year.
Without these credits the bottom line of Tesla would shrink significantly. For that reason they would be considered more important to Tesla, in the long term, than the $1.5 billion the company holds in bitcoin.
The probable deal with the government
The most likely scenario is that Musk and Tesla made a deal with the government to not allow bitcoin to be used as a means of payment. In return, the probably were allowed to keep the tax credits and its bitcoin holdings.
Why go through all of this? Because Tesla gave bitcoin a lot of legitimacy in the eyes of those unfamiliar with it. While some believe that in return would encourage more bitcoin mining and energy consumption, my belief, based upon comments from the Federal Reserve and Yellen, is that they don’t want bitcoin to gain too much legitimacy with the general public. If bitcoin gains too much traction beyond its existing core base, it would lift other cryptocurrencies with it, which in turn could turn some of them into real competitors to fiat currencies around the world.
Even though this is only a theory I adhere to, it is the only thing that makes sense concerning the flip flop of Musk in regard to using bitcoin as a means of payment for Tesla products.
There is obviously something going on behind the scenes with the government, Musk and Tesla that resulted in the decision not to allow bitcoin as a way to acquire Tesla products.
Even though Musk attempted to position it as an environmental issue, as many experts have pointed out, a significant portion of energy used to mine bitcoin is sustainable.
Musk could have used energy usage as a swipe at China, which uses a lot of fossil fuels to mine bitcoin. That could be because of the continual tensions surrounding Tesla’s operations in the Middle Kingdom.
That could be true, but Musk isn’t likely to stir up the Chinese leadership too much, as it’s the market with the highest growth prospects in the years ahead.
With that in mind, Musk is certainly doing nothing more than sticking up for the best interests of Tesla and himself by eliminating the option of bitcoin as a means of transactions in the company.
And when considering the close to irrelevant use of bitcoin as a means of exchange for Tesla, Musk gives up very little by changing direction in order to maintain its garnering of credits for the foreseeable future.
Yet, the cost to many investors has been great, and the leftists are seizing the opportunity to hammer on bitcoin as being bad for the environment.