The future of money apparently looks something like this: Tesla Inc. techno-king Elon Musk posts a one-word tweet — “Indeed” — that suggests his company may have sold its stash of Bitcoin. The cryptocurrency’s price sinks to a three-month low. Musk then posts a new tweet, clarifying that Tesla hasn’t sold any. Prices perk up again.
Cue much gnashing of teeth as Bitcoiners, already incensed by Musk’s attack on the cryptocurrency’s wasteful carbon footprint last week, cry foul over the billionaire’s outsize market influence. As tiresome as it is to see Musk repeatedly toy with markets via his 55 million followers, it’s hard to feel sorry for the crypto-punters.
Musk’s trolling keeps undermining the insistence of true Bitcoin believers that their favorite token is bigger than any individual, and that the recent price boom is based on solid fundamentals. The original cryptocurrency’s recent 20% drop over five days began with a Musk tweet announcing Tesla was suspending Bitcoin payments because of inefficient, environmentally unfriendly mining algorithms that suck up large quantities of energy. The latest confused price swings over Tesla’s crypto portfolio show how this speculative market can turn on a dime.
By explicitly leaving the door open to more energy-efficient alternatives to Bitcoin, Musk is also boosting the price of tokens that might fit the bill. Some of the best-performing digital tokens over the past week are those viewed as potentially Tesla-friendly by their supporters: The likes of Polygon and Cardano, which are up 80% and 25%, respectively, hand more mining power to those with the biggest pile of coins (“proof of stake”) rather than those with the most powerful computing power (“proof of work,” as used by Bitcoin).
The reframing of crypto as a problem to solve has turned the frantic gold rush into a green scramble — even if it’s unclear whether that in itself is going to suddenly create more practical use cases.
One can debate how meaningful this all is in terms of who will buy what and when, but what’s clear is that one of the wealthiest people in the world is exposing cracks in the narrative of crypto adoption: that it was supposed to be a straight shot to higher and higher prices. Whatever qualms regular corporate treasurers had over sticking Bitcoin on their balance sheet had been drowned out by the tech influencers promising to keep buying — including Musk, who threw $1.5 billion at crypto back in February.
By hitting the pause button, Musk has suddenly made the conversation among the Silicon Valley billionaire class and their laser-eye supporters more tortured. Jack Dorsey’s Square Inc. recently looked on the back foot when it said it would continue to assess its Bitcoin investment “on an ongoing basis,” while also trying to make it greener.
By committing the unpardonable sin among Bitcoiners of suggesting the original cryptocurrency is flawed, Musk is also hinting that picking future winners in an increasingly crowded field of digital-cash competitors — including Facebook Inc. — isn’t straightforward. Musk has split his Bitcoin allegiance with satirical spinoff Dogecoin, giving it a more serious sheen by talking about improvements that would let a token win “hands down” — such as faster transaction capacity and lower fees — and hinting that “maximalists” who swear by Bitcoin have it wrong.
Musk is no fool, and he may have ulterior motives: perhaps a plan to remake Dogecoin in his own image, or some kind of TeslaCoin that serves his interests. In a market where the greater fool trade reigns supreme, who would turn their nose up at this? If the current speculative mood is anything to go by, even a coin that looks like a blatant money-and-power grab by a billionaire might get snapped up.
There have been several crypto boom-and-bust cycles. The latest boom has been accelerated by falling trust in traditional institutions and increased time spent online amid Covid-19. In the kingdom of the blind, it looked for a while like the laser-eyed man was king. Now the techno-king appears to be making his move. Unless, that is, the no-less-influential regulators who are stepping up their scrutiny of crypto markets get there first.
Bloomberg
