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Bitcoin Far from an Eco-Friendly Cryptocurrency

The cryptocurrency market experienced a dramatic surge in day trading interest in 2021. In the first two months of the year, it is estimated that the number of crypto day traders increased ten times when compared to the previous months. 

The sudden interest was sparked by the parabolic evolution of the price of some of the most important coins – Bitcoin, Ethereum, etc. Bitcoin, for example, advanced from $10k to $58k in less than three months, and FOMO (Fear Of Missing Out) triggered an increase in the number of crypto traders.

Despite the central bankers’ warnings, Bitcoin keeps attracting interest. The recent move lower from $58k to $45 was met with nothing but renewed buying. Yet, the cryptocurrency is criticized for the high energy consumption of mining and the limited use case. After all, besides facilitating international remittances, there is little or no use of this technology as of yet.

Tesla Joining the Bitcoin Frenzy

Right at the start of February, Tesla made a stunning announcement – it invested $1.5 billion in Bitcoin during the course of January. Bitcoin traded around $40k at the time of the announcement, and the news sparked the rally that lifted the price to the recent high of $58k.

Tesla faced criticism for its investment for several reasons. One relates to the electricity consumed to mine the Bitcoins. For the amount paid (i.e., $1.5 billion), the company acquired 45k coins. The cost to mine this number of Bitcoins is a carbon footprint of the equivalent of putting 890k gas-powered cars on the road. Ironically, this is almost twice when compared to the entire number of electric vehicles sold by Tesla in 2020. Where is the eco-friendly company that Tesla claims to be as per its mission and vision?

During last week’s decline, the cryptocurrencies abrupt fall led to a bit of panic among retail investors. Ethereum, for instance, dropped 37% in nine days. Bitcoin dropped over 20% in three days. Therefore, Tesla and other institutional investors did feel the heat on the move lower.

For those that invested in Bitcoin in its early stages, they sit at the comfort of the higher prices. However, the latest investments poured in at average prices of $52k (e.g., Square – $150 million investment), $52.6k (e.g., Microstrategy – $1 billion investment), or $40k (estimated price paid by Tesla on its investment).

No matter how you put it, all these funds are in for a profit. Until Bitcoin solves its electricity consumption issue, it will be threatened by governmental regulation to do so. Thus, it is still poised to remain a volatile currency.

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