What hurts crypto currency

Opinion: Elon Musk - a burden for the Bitcoin

A man changes his mind and the Bitcoin is shaken to its foundations. Admittedly, it's not just any guy who is changing his mind - it's Tesla boss Elon Musk, a tech pioneer and perhaps the most prominent crypto pusher of all. His support, mainly through tweets and little jokes, have helped Bitcoin and Dogecoin to set new course records.

Bitcoin was up 20 percent after Musk added the hashtag #bitcoin to his Twitter list and another 15 percent two weeks later when Tesla announced it had bought $ 1.5 billion in Bitcoin and cryptocurrencies Now accepting at the checkout if someone wants to buy an electric car and pay with it.

When Musk turned 180 degrees on Wednesday and announced on Twitter that Tesla no longer wanted to accept Bitcoin payments because mining the currency was harmful to the environment, it led to an erosion of the Bitcoin value, which fell by 15 percent : A Twitter-driven course fireworks and shortly afterwards a course crash also caused on Twitter.

These wild fluctuations show that Bitcoin is not a stable investment, as its friends, admirers and disciples like to claim. It remains an exchange product that reacts too sensitively to the influence of a single individual.

Stumbling block on Bitcoin's path

Bitcoin has had a painful history, full of ups and downs. Musk and his countless followers in the crypto community, who always accept his tweets like revelations, keep making Bitcoin's efforts to gain acceptance on the way to revolutionize the modern financial system nullify.

Musk's influence on Bitcoin is a chilling example, a warning that digital money is not the independent, decentralized, reliable inflation-containing, safe haven or even "digital gold", as its proponents tirelessly try to lead us to believe. On the contrary: The SpaceX founder is something like "the central banker of cryptos", as Tracy Alloway from Bloomberg puts it: someone who often creates moods with just a single tweet.

DW business editor Ashutosh Pandey

Expensive chat

Elon Musk's other crypto love, the dogecoin, initially thought of as a parody, suffers a similar fate. In the past few months, the self-proclaimed "father of the dog" has been pushing the digital coin diligently. He spearheaded a campaign that began as a "social media joke" and resulted in record ratings only to refer to the Dogecoin as "hustle" - the word "hustle" - on a popular US TV show last week many meanings including "hoax" and "cheating".

  • How does Bitcoin work?

    Pretty cryptic

    Bitcoin is a cryptocurrency. The means of payment therefore works digitally, without physical coins and notes, and is based on cryptographic processes. Bitcoin is organized on a decentralized basis and does not require banks or central banks. The currency can therefore be used worldwide and across borders under the same conditions and cannot be compared with any previous monetary system.

  • How does Bitcoin work?

    The "father" as a mystery

    In January 2009, open source software for Bitcoin was published under the developer pseudonym Satoshi Nakamoto. A few months earlier, this person or group had first publicly described how the digital currency works in a text.

  • How does Bitcoin work?

    How do you get bitcoins?

    There are different ways to get Bitcoins: You buy them on an internet platform (and pay for them with euros, for example). Or you accept Bitcoin as a means of payment for goods or services that you offer. Or you can become a "miner" and mine for bitcoins yourself.

  • How does Bitcoin work?

    Also digital: without a wallet, everything is nothing

    Cryptocurrencies are stored in a virtual wallet. It contains keys. Only with them can you find out who owns a Bitcoin. You also need them for transactions. A wallet can be saved on a smartphone, a computer, a USB stick, specially secured storage media and in a web cloud. Without a wallet, you have no access to your bitcoins.

  • How does Bitcoin work?

    Hats off to the Kypto currency

    Let's say Mr. X wants to buy a hat from Ms. Y and pay with Bitcoin. Both must have a public key (comparable to an account number) and a private key (comparable to a TAN) for a Bitcoin transaction.

  • How does Bitcoin work?

    Block building blocks

    Ms. Y sends her public key to Mr. X. He confirms with his private key and uses it to request a transaction. This is collected in a block with a few hundred other transactions (hence the term blockchain, but more on that later).

  • How does Bitcoin work?

    Arithmetic servants

    The block is distributed to all computers in the decentralized Bitcoin network. These computers are also called miners. They check the transactions going from one wallet to another and confirm them. Theoretically, everyone can let their computer work in the network. But now most of the work is done by professional server farms.

  • How does Bitcoin work?

    In the sweat of their graphics cards

    Before the transaction is actually carried out, the miners have to solve cryptographic computing tasks for each block. This requires computing power and strong graphics cards. Mining works like a competition: several miners try to decrypt a block from the blockchain at the same time. Whoever manages this first receives new - that is, "freshly mined" - Bitcoins as payment.

  • How does Bitcoin work?

    A kind of pearl necklace

    The block of Mr. X and Mrs. Y is part of a long chain, the so-called blockchain. All Bitcoin activities are stored in this decentralized database. The blockchain thus serves as the payment book (ledger) for the cryptocurrency: it contains all transactions and wallet information of the parties involved. Although all of this is recorded and visible, users remain anonymous.

  • How does Bitcoin work?

    Mining is done here

    China has by far the largest share in the computing power of the Bitcoin network (hashrate) and thus in its electricity consumption. Other important countries are the USA, Russia, Kazakhstan, Iran and Malaysia, according to the Bitcoin Electricity Consumption Index from the University of Cambridge. Mining is only worthwhile where electricity prices are cheap.

  • How does Bitcoin work?

    Huge hunger for energy

    The energy-intensive process for calculating the Bitcoin transactions (mining) requires around 120 terawatt hours (TWh) per year, according to the Bitcoin Electricity Consumption Index from Cambridge University. That is more electricity than any of the blue-colored countries consumes in a year. Graphics: Per Sander Texts: Gudrun Haupt

Musk's irresponsible steamy chatter has caused a lot of pain for a very large number of small investors because Dogecoin has lost a third of its value. As if trying to make up for their losses, Musk asked his more than 54 million Twitter followers whether Tesla should now accept Dogecoin as a means of payment after SpaceX had just announced that it would keep it that way. The Musk fans responded with an overwhelming "Yes!" and Dogecoin was able to make up some of the losses.

Banks and investment advisors looking to sell cryptocurrency-related investments should add one more factor to their long risk list: The value of an investment in cryptocurrencies is subject to extreme risk from tweets and jokes from Elon Musk.

Do Dogecoins have more sex appeal?

Musk deserves praise for shedding light on Bitcoin's devastating environmental footprint. A currency that consumes more energy - and much of it is very polluting coal-fired electricity - than entire economies to keep the business going has little right to be a "currency of the future". Perhaps the Musk criticism could lead some Bitcoin followers to look for less expensive mining technology or a greener alternative.

What made Musk change his mind is not clear. After all, climate activists have been criticizing Bitcoin's miserable environmental balance for years. Could it be that Musk is just bored with the bitcoins? That this alternative money has lost its "underdog appeal" since it was so successful on the market and that it is no longer fun to push it? Dogecoin still has this "newcomer" appeal, which could motivate the "Doge Father" to drop the Bitcoin for it. Musk tweeted yesterday that he is now working with the Dogecoin developers to increase Dogecoin "transaction efficiency" and that the whole thing is "maybe promising".

Musk is a hypocrite

It's hard to buy the environmental argument from Musk. If he were really interested in the planet and its future, he could not have ignored the contradiction of investing in bitcoins as a producer of clean electric cars.

By the way: Tesla will continue to hold its Bitcoin shares. The digital coins in Tesla's cash storage systems do not get any greener than if they were used for further transactions. And not wanting to be paid in bitcoins is not exactly a sacrifice, if only there are fewer customers who put bitcoins on the counter for a car.

The Elon Musk's recent U-turn is obviously hypocritical. Bitcoin fans should look for a more reliable brand ambassador if they want to realize their grand plans of redeveloping the current financial system from the ground up.

This comment has been translated from English.