Ethereum made another journey into price discovery this week, crossing over $4,200 per ETH. That is until CPI data was released, followed by a tumultuous series of events, leading to a de-risk sell-off across the crypto market and tech stocks. Here’s what you need to know.
To everyone’s lack of surprise, inflation rates are accelerating at a pace we haven’t seen in over 12 years. April reports show that consumer prices leapt 4.2% in the fastest uptick witnessed since 2008 (CNBC). Energy prices are up 25% year over year, gasoline up 49.6%, and even used cars and truck prices are up 21%. Lumber stands as the big price hike winner due to the housing shortage, with prices having increased a staggering 124% in 2021.
The rise in inflation does not appear to be transient, as it is showing a steady acceleration. As the Fed keeps printing money to stimulate the economy, proposals of more stimulus checks are on the horizon. It now appears that The Fed and the Treasury Secretary are at odds on the impact of inflation, and on the right next course of action, including raising interest rates and reducing Fed buybacks. Bitcoin, due to its algorithmic scarcity (there is less than 19-million BTC in circulating supply) has typically soared on news of rising inflation. This time around, its behavior was all but typical.
Elon Musk, CEO of Tesla, in a puzzling series of events, announced on Twitter that Tesla would stop accepting Bitcoin payments due to environmental concerns, although it plans to keep its existing Bitcoin on its balance sheet. It was only in February 2021 that Tesla announced they added $1.5 Billion of Bitcoin to their balance sheet, and in March that they started accepting Bitcoin payments for its cars.
“We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” - said Musk (DeCrypt)
Musk and Tesla’s drastic change in stance towards Bitcoin caused market panic and widespread confusion. Bitcoin’s environmental debate has been long-standing for years. Bitcoin doesn’t just consume energy, it turns energy into scarce transactable value. What is often overlooked is the estimate that the Bitcoin network is powered by around 50% to 75% renewable energy, making it much more sustainable than is otherwise purported.
Bitcoin mining also brings financial incentives to innovation and expansion of renewable energy, giving a direct way for green energy producers to translate the power they create into easily accessible real-world value while also reducing inefficiencies. For example, as a result of Bitcoin mining, oil fields that used to burn off excess methane gas into the atmosphere now utilize that methane byproduct to power Bitcoin mining operations.
While Bitcoin’s energy consumption has been on the rise in 2021, one would have expected Tesla and Elon to do their due diligence on the matter before embracing and changing stances on its position. Perhaps this is now to be expected, as during Elon Musk’s debut on Saturday Night Live he called DogeCoin a hustle right before cheering it on, “to the moon.”
Elon Musk then followed up on Twitter saying he is working with Dogecoin developers on transaction efficiency. Sparking a bifurcation on the Crypto community’s stance toward Elon, with many publicly canceling their Tesla orders in protest. Much wow.
For perspective, the energy consumed by Proof of Work (PoW) blockchains is being disrupted by the crypto industry itself. As Ethereum sets its goals on migrating to a more energy-efficient model of Proof of Stake, projects such as Cardano (ADA), Tezos (XTZ), and Algorand (ALGO), all have promise of a greener crypto economy. As we see the crypto space continuing to strive for more global and environmental efficiency, we truly believe the future is both bright and green.
Top Market Movers
- Yearn.finanace (YFI) +38%
- Ethereum (ETH) +16%
- Compound (COMP) +13%
- Cardano (ADA) +11%
Forbes > "Tesla And Ethereum Billionaires Spark Shock $300 Billion Crypto Price Crash As Bitcoin And Dogecoin Suddenly Plummet"
Cointelegraph > "Which 'green' cryptocurrency is Tesla likely to add for payments?"
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