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When Elon Musk revealed three months ago that Tesla had bought $ 1.5 billion worth of Bitcoin, digital currency fans claimed the measure would accelerate its wider adoption as a corporate finance tool.
On Wednesday, however, Musk withdrew his personal endorsement, swearing to accept the cryptocurrency as payment for Tesla cars and undermining the company’s justification for using it as a destination to park its spare cash.
As usual, Musk’s comments provided immediate fuel for crypto traders, as well as ammunition for the warring krypton tribes on Twitter. But it was harder to tell if his announcement would have any effect on broader perceptions of the currency or what role Musk’s views will play in the next phase of cryptocurrency adoption.
“He always says things every other day and it’s not consistent,” said John Coffee, a professor at Columbia Law School. Tesla’s claims pushing bitcoin into the mainstream Corporate use always sounded secondary to its interest in pure financial speculation, Coffee added. “I think his first investment was much more than a foreign currency investment than anything else.”
All that is behind Musk’s love affair with Bitcoin, its effect on market prices has been hard to ignore. The price of the currency jumped 15% the day Tesla’s investment was revealed and fell 6 percent within 24 hours of this week’s announcement.
The latest fall came just days after Musk jokingly denounced dogecoin, another cryptocurrency he had heavily promoted. “A rush” on American television, sending its value 15%.
“It has certainly become the most important factor in cryptography” when it comes to moving prices, JP Thieriot said. Thieriot suggested that its influence also extends to the way of thinking of digital currencies.
Even Musk cannot force cryptocurrencies into a major commercial use. He said this week that Tesla had withdrawn from accepting currency payments due to the environmental effects of energy-intensive “mining” that involves validating transactions. known number has ignored in the past.
Many cryptography experts said Musk’s change of mind seemed to reflect the acceptance that Bitcoin was not suitable for payments. Other companies that had accepted bitcoin as a form of payment in the past, including Dell and Microsoft, also abandoned it later.
“I don’t think a lot of people want to spend their bitcoin,” said Wilson Withiam, an analyst at cryptography research group Messari. “If there was real money, I would [Tesla] did you really do that “
Musk’s change of approach extended beyond the issue of payments. He also vowed that his electric vehicle manufacturer would become an active participant in the bitcoin market, saying it would “not sell any bitcoin.”
The compromise came two weeks after Tesla surprised Wall Street with a Profit of $ 101 million of selling part of its holdings, raising concerns that the company’s performance would be increasingly tied to the crypto trade.
The commitment not to sell may have reassured some investors, but it also effectively undermined Tesla’s case of using the currency as part of its day-to-day corporate treasury operations.
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Zach Kirkhorn, chief financial officer of Tesla, told Wall Street two weeks ago that the liquidity of the bitcoin market justified Tesla owning the cryptocurrency, as it meant the company could actively buy and sell.
This flexibility was particularly important, he said, as Tesla faced more cash demands to finance plants in Texas and Germany while it also faces the extreme financial tensions of its supply chain caused by the global shortage of semiconductors.
“Being able to access our money very quickly is very important to us right now,” Kirkhorn said. With a tweet promising to block the company’s investment in cryptography, Musk has torpedoed that foundation.
Some bitcoin sponsors said Musk had still helped pave the way for the wider adoption of bitcoins by corporate treasurers, encouraging other companies to consider it a valid stake, even if there has been there are almost no examples others announce that they were buying the currency.
His initial enthusiasm for bitcoin had generated interest (including among treasurers) that would likely continue well beyond his recent change, said Rayne Steinberg, executive director of digital asset management group Arca. “People were talking about it, he got into the zeitgeist.”
Some corporate treasury experts, however, said Tesla’s flirtation with cryptocurrency holdings had done nothing to encourage wider adoption.
“He created conversations between treasurers, but I don’t think anyone changed his mind,” Jerry Klein told Treasury Partners of New York. Klein added that the overriding requirement of treasurers to preserve the cash value of their companies had completely ruled out cryptocurrencies.
But if Musk’s involvement in bitcoin could not change the position of the currency in the corporate world, his latest intervention has raised another perspective: that it could become king so that a future cryptocurrency can rival or even replace bitcoin.
Using its celebrity to draw attention to the high power consumption of Bitcoin, and that many participants in the network are in China, relying on coal-fired power plants, could speed up the search for alternatives, according to the supporters. Surveys of millennials and Gen Z, who are big buyers of cryptocurrencies, showed they were also deeply concerned about climate change, Thieriot told Uphold. “Finally, these things need to converge,” he said.
Musk’s comments sparked rapid attention among cryptocurrency sponsors who claim to have fewer adverse effects on the environment. These included Bitcoin Zero, a carbon-neutral version of Bitcoin, and Cardano, one of several networks that use the so-called betting test mechanism to validate transactions, which consume less energy.
Most recent networks, however, have struggled to get attention and a share of the investment in cryptography. Most of the displaced attention has focused on the ether, the digital token used on the ethereum network. With a total value of $ 440 billion, its tokens are worth almost half of bitcoin.
Ether is already being used by some investors as a form of digital money, and its planned move to a participation testing system could finally be completed next year, putting it in a good position for wider support, he said. Withiam, the analyst at Messari.
Musk didn’t immediately show his hand on which cryptocurrency will win his favor when he moves away from Bitcoin, but he did. On Thursday, he tweeted, “Working with Doge developers to improve the efficiency of system transactions. Potentially promising.”
He said Tesla wanted to use a token that consumes less than 1% of energy like bitcoin, a comment that will surely let crypto investors guess and ensure all eyes are fixed on their tweets for the next clue of his thought.
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