Let’s start with the announcement:
Elon sure has a way of making news. Since the beginning of 2021 he has been announcing his support of Bitcoin and how Bitcoin was a useful invention. While acknowledging Bitcoin’s utility, Elon was also surprising people by promoting Dogecoin, a cryptocurrency which was created as a joke. The creators of Dogecoin were trying to make fun of the cryptocurrency mania that had taken place in 2013. Yes, 2013! Dogecoin creators thought cryptomania was bad in 2013. Oh, how I digress…back to Tesla.
In February of 2021, Tesla made a surprise announcement that it had spent roughly 6% of its cash to purchase $1.5 Billion worth of Bitcoin to hold on its balance sheet. It also announced that it would soon take Bitcoin as payment for the purchase of Tesla vehicles, a move that was questioned even by Bitcoin bulls. You see, Bitcoin is not designed nor intended, for large numbers of transactions. The Bitcoin network is limited to roughly 500,000 transactions per day compared to billions of transactions handled by Visa or Mastercard each day. Bitcoin was not designed to replace daily transactions, but rather as the store of value, for the long-term, as an alternative to cash or gold.
But even after Tesla’s official endorsement of Bitcoin, Elon was still personally pumping Dogecoin “to the moon.” And when Elon talks, people listen. Dogecoin’s price, which had stagnated for years, started to skyrocket. In January, the price of a Dogecoin was less than a penny! Since then, it has increased more than 5,000%, peaking at more than $0.70 shortly before Elon was set to appear on Saturday Night Live:
Phew! That is some real money! Even as I write this, Dogecoin has a market cap of $129 Billion. That is mind boggling considering it was literally CREATED AS A JOKE!
So despite the official investments in Bitcoin by Tesla, Elon’s personal actions, tweets and meme promotions were all around Dogecoin. One could hardly keep up. Dogecoin even came up in multiple skits on Elon’s appearance on Saturday Night Live. Today, it seems like Elon and Tesla are reversing course on Bitcoin and hinting that they might still support a cryptocurrency that uses less than 1% of Bitcoin’s energy per transaction. What!? You know what cryptocurrency uses less than 1% of Bitcoin’s energy per transaction? Dogecoin! However, there are questions about the security of Dogecoin or its legitimacy as a real-world cryptocurrency. Elon appears to be shrugging off these real-world concerns despite the experts in the field begging him to do his homework on the subject.
Does all this mean Elon and or Tesla are about to pump up Dogecoin even more?
Who knows, but one thing is for sure: Elon’s brain works differently than the rest of us. That’s both good and bad. As he pointed out in his Saturday Night Live monologue: “I reinvented electric cars and I’m sending people to Mars on a rocket ship. Did you also think I was going to be a chill, normal dude?”
“Chill and Normal” is definitely not how I would describe Elon’s announcement about Bitcoin today. There are so many contradictions with his tweet. First of all, it’s highly unlikely that Elon, one of the world’s smartest people, didn’t already understand the energy and environmental impacts of Bitcoin when Tesla went all-in on Bitcoin. Then, there’s the issue that Bitcoin may actually have a positive impact on renewable energy, which Elon himself validated with this tweet:
The issue here is not about Tesla no longer accepting Bitcoin as payment, but why would the CEO of a company that holds more than $2 Billion worth of Bitcoin on its balance sheet, start speaking negatively about the very same asset it holds? The impact to Tesla’s own balance sheet in the hours that followed Elon’s tweet was more than $200 Million in the wrong direction! $200 million negative impact on Tesla in a matter of hours!
All of this is a major distraction for Tesla and Elon Musk. Rather than focusing on the world’s transition to sustainable energy (Tesla’s mission) and colonizing Mars (SpaceX’s mission), the conversation is all about irrelevant things. Whether or not Bitcoin is a legitimate store of value is not a conversation that Tesla needs to be a part of. Even less so, Tesla and Elon Musk don’t need to pump Dogecoin. It’s time that Elon understands that his words have some very real-world effects on people’s livelihoods.
Elon, if you are listening, chalk this up to a mistaken tweet, similar to the “am considering taking Tesla private at $420. Funding secured” and please do less of these kinds of tweets. The world needs you to stick around as a prominent figure for a lot longer!