So Elon Musk made some news this week. Nope, not by absolutely whiffing it during his hosting spot on SNL, though he did indeed do that. No, the figurative lovechild of Howard Hughes and Nikola Tesla broke the hearts of a coven of crypto speculators this week when he suddenly reversed Tesla’s recent policy of accepting Bitcoin as payment for a new electric car.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhPMay 12, 2021
On its face, this is hardly a surprise. The flagship crypto token that parades around like an actual currency has gained a huge following in recent years, sucking up raw computing power in the cryptomines and turning it into foggy carbon emissions for no real purpose other than to make wealthy investors even richer than they already are. But unlike an actual currency that you can buy something with, the price of cryptocurrencies are extremely volatile, swinging wildly up and down by the 100s if not 1000s of percentage points in less than a year.
While Bitcoin is flying high – buoyed by thicker methane and CO2 plumes pumped out from coal-fired power plants in China and natural gas wells around the world – everyone from Musk to Goldman Sachs has been looking to cash in on the speculative gains from crypto while the getting is good.
For Tesla, a company ostensibly dedicated to saving humanity from Climate Change through electric vehicles, dabbling in cryptocurrency speculation has always been a jarring and odd fit (so long as you forget that their first priority is just to make gobs of money). Honestly, the fact that Tesla is now suddenly out of the crypto game probably has little to do with its professed concerns about the environmental devastation that cryptomining is contributing to and more about the future price of cryptocurrencies more broadly.
The environmental impact of cryptocurrency mining was known long before Musk and Tesla decided to dabble in crypto. In the end, Musk is a businessman and Tesla is in the business of making money and both he and his company are probably getting out while the getting is good. While Musk’s statement says that Tesla won’t be selling any Bitcoin, there’s no real way to hold them to that. Musk’s tweet professing concern over Bitcoin’s environmental impact has major I’m-shocked-shocked!-to-find-that-gambling-is-going-on-in-here energy and I have no doubt that whatever Bitcoin Tesla gained from vehicle purchases by Silicon Valley VCs will be liquidated at their earliest convenience – and almost certainly before they end up taking a loss on it.
All that aside, this can only be a good thing for the rest of us.
Why cryptocurrencies are awful
Elon Musk is one man, in the end, but unfortunately, he wields a lot of influence. He has a devoted following of eager wannabe indentured servants who will follow him Red Faction-style into a mining impressment on Mars when the time comes, but for now, they’re all in on Dogecoin, pushing the market capitalization of a literal joke cryptotoken to just over $72 billion (about £51.6 billion/AU$92.5 billiion) at the time of this writing.
While sad in itself, there is something to be said for “capitalist market efficiencies,” and this definitely ain’t it. If there was ever an unproductive use of capital, cryptocurrencies certainly qualify.
Even leaving aside the environmental impact, we do have genuine scarcity issues at the moment. And not just with graphics cards or other PC hardware and consoles, but the semiconductors that go into cars, medical equipment, and everything in between. Diverting the productive use of semiconductors we desperately need for actual products into cryptocurrency mining might not be solely responsible for semiconductor shortage, but it’s definitely not helping matters.
Quite frankly, a crash in cryptocurrency prices should be celebrated by just about everybody who isn’t deeply invested in it, which isn’t a whole lot of people in the end, so I’m hopeful that Musk bailing on Bitcoin is the start of a trend. It’s too soon to tell, but given that the only two things Bitcoin are really good at – financial speculation and criminal activity – make me optimistic that Musk’s quitting crypto is a portent of days to come.
While there’s no way to truly tell how much cryptomining is cutting into everyone else’s ability to get their hands on semiconductors for other purposes, not just for graphics cards, it is certainly a factor and one that we have can arguably do something about. While ramping up semiconductor fabrication capacity will take years, crypto is operating largely free of interference by people who have the power to regulate it into irrelevance. All they need to do is decide to do something.
The recent Colonial Gas Pipeline ransomware hack points out the other nagging downside of cryptocurrencies – they are extremely attractive for criminals. While there are plenty of crypto proponents who contest this assertion, it’s inescapable that an untraceable “currency” is exactly the kind of thing that criminals are going to be drawn to. It’s the modern-day equivalent of a briefcase full of unmarked bills, except it’s even more secure since no one has to actually go and pick up the briefcase.
The fact that this group went and did something as dumb as seizing up the gasoline reserves of tens of millions of Americans on a whim for a reported $5 million payout in an unnamed cryptocurrency is no doubt going to raise pressure on the US government to treat cryptocurrencies as the potential national security threat that they are. Ransomware like this could hardly exist without cryptocurrency payments protecting hackers anonymity and so the most natural way to combat ransomware that is increasingly targeting critical infrastructure is to regulate cryptocurrencies aggressively to make them much less useful for criminals.
It’s not surprising that Musk issued his statement the same week that a ransomware attack hit some critical US infrastructure. The potential crackdown on crypto, not the environmental damage cryptomining poses, is much more likely to have prompted Tesla’s move away from Bitcoin. Hopefully more will follow Tesla’s lead.
Can Elon Musk’s tweet help you get an RTX 3080?
While Musk alone won’t tank crypto, his bringing attention to the problems it poses, even if it’s disingenuous, will impact the way people look at it. With one tweet, Musk drove the price of Bitcoin down 12%.
Hopefully his move will signal to others that maybe it’s time to get out of the crypto game before its price plunges further, and with the potential for US government action after the Colonial Pipeline hack, that’s a much more likely bet than it was even a couple of weeks ago.
Take away the demand for cryptocurrencies and you take away the incentive to mine them, which would mean fewer miners out there buying up all the RTX cards they can get their hands on. This won’t immediately make an RTX 3090 or RX 6800 XT more available, but in pretty short order it would lessen the demand that Nvidia and AMD are struggling to meet, meaning that they’ll be somewhat closer to getting a new graphics card into the hands of anyone who wants one.
All in all, I’d call that a win that’s been a long time coming.