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Musk turns on Bitcoin

Good morning! Elon Musk tweeted (of course) that Tesla would no longer accept Bitcoin, due to the "rapidly increasing use of fossil fuels for Bitcoin mining and transactions", sending crypto prices into a tailspin.

Musk, the self-proclaimed "Technoking", must have only just realised that Bitcoin consumes a lot of electricity. 🤔 Plenty more in today's Tech Wrap below.

Market Wrap

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Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 (+1.22%) recovered some of its recent losses overnight, ending its worst three-day decline since late October 2020. The tech-heavy Nasdaq (+0.72%) and industry-heavy Dow Jones (1.29%) also gained.

Prices rising: Transitory though, right? The US Producer Price Index increased by 6.2% for the 12 months ended in April, the largest increase since the Bureau of Labor Statistics started tracking the data in 2010.

Recovering well: US initial jobless claims fell to 473,000 last week, the fourth decline in five weeks, and while still above pre-pandemic levels are now at their lowest level since mid-March 2020.

Margin squeeze: Local online accounting software firm Xero crashed 13.0% yesterday despite adding 288,000 new subscribers in the six months to 31 March, as its Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margins fell a huge 23.7% over the past six months. It also lost ground in important overseas markets, with new user growth slowing in both the UK (-29%) and US (-4%).

Tech Wrap

Musk turns on Bitcoin

Elon suddenly isn't so thrilled with his purchase.
Elon suddenly isn't so thrilled with his purchase. The Times

Another week, another series of Elon Musk tweets sending markets wild. The 'Technoking/Dogefather' crashed the price of most cryptocurrencies yesterday after revealing that Tesla would no longer accept Bitcoin due to a newfound concern over its environmental impact:

"Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.

‌‌‌‌Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.

‌‌‌‌Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.

We are also looking at other cryptocurrencies that use <1% of Bitcoin's energy/transaction."

Stepping back: Musk runs a hip electric vehicle company. Many of his clients are inner city 'liberals' (to use the American terminology), some of whom drive Tesla's because they're better for the environment than the alternatives. Bitcoin's environmental impact made headlines recently following a monologue by talk show host Bill Maher, where he noted it used more electricity than some countries (e.g. Sweden, the Netherlands) along with many Big Tech companies such as Netflix. Musk would have been under pressure for the apparent contradiction.

Not the whole truth: The Harvard Business Review had an article on Bitcoin's electricity usage just last week. It concluded that while Bitcoin uses a lot of electricity, its environmental impact is "a lot less alarming than you might think", because:

  • Energy consumption alone is not a reliable method for determining Bitcoin's carbon emissions, given a significant portion is carbon neutral.
  • Bitcoin miners don't have to use electricity near end-users, with some utilising power sources that are otherwise inaccessible/wasted, such as in Siberia and North Dakota.
  • Most of the electricity usage is in the mining process, not transaction validations, so dividing total energy usage by the number of transactions inflates the metric.
  • Bitcoin grows less reliant on carbon every year and the expansion of mining activity will not increase at the current rates indefinitely (so don't extrapolate a trend line).

Buyer beware: All cryptocurrencies with the exception of stablecoins (which are 'pegged' to a fiat currency such as the US dollar) are inherently volatile. The fact that an Elon Musk tweet or skit on a comedy show can cause a double-digit price movement means it's not (yet) ready for prime time.

For those who take Musk at his word (good luck to you!) in terms of Tesla using "other cryptocurrencies that use <1% of Bitcoin's energy/transaction", there are several candidates: essentially any blockchain that uses proof of stake (e.g. Ripple, Stellar, Cardano, Ethereum 2.0 (coming soon™)) instead of proof of work (e.g. Bitcoin, Ethereum, Litecoin).

The Wrap Up

  • Australia has a bad case of 'airborne denialism', with the official guidelines still failing to acknowledge airborne transmission of COVID-19. Even the notoriously slow-moving World Health Organisation conceded aerosols were a transmission method last month. Politicians will be reluctant to move on hotel quarantine while this outdated advice remains the "best available".
  • ScoMo again said that he supports China's position on Taiwan – "One Country, Two Systems" – not Australia's official position, which is one of maintaining unofficial ties with Taiwan (against the wishes of China). The government later issued a formal clarification that the Prime Minister was, in fact, mistaken on both occasions – he was apparently talking about Hong Kong. 🙄
  • New South Wales has joined Victoria in trying to get international students back this year using purpose-built quarantine facilities. The plan is "being considered by the federal government".
  • Fresh on the heels of a big 25 million dose order for the Moderna mRNA vaccine, Health Minister Greg Hunt confirmed that the government is in talks with manufacturers to get at least one local mRNA facility up and running some time in 2022.
  • First unveiled in June 2019, Facebook will soon launch its US dollar stablecoin, Diem (formerly called Libra). It will be a blockchain-based payment system registered as a money services business with the US Treasury's Financial Crimes Enforcement Network.
  • Crypto billionaire and creator of Ethereum, Vitalik Buterin, dumped $US1 billion in shitcoins (meme tokens Akita Inu and Shiba Inu) and donated it to the India Covid Crypto Fund. 👏
  • Amazon won an appeal against the European Union, overturning a 2017 antitrust decision from the European Commission that had ordered Amazon to pay 250 million euros in taxes. The court ruled that regulators had failed to prove Amazon got an illegal advantage from tax rulings in Luxembourg, with the Commission "incorrect in several respects".