Elon Exposed: Tesla’s Incentive Against Bitcoin
Elon Musk’s rise to power has not necessarily come undeserved. He is arguably one of the greatest minds of our time leading projects like Neuralink, Space X, PayPal and Tesla. With an immense reach of 57 million followers on Twitter alone, Elon’s actions as a public figure have tanked his company’s stock and brought DOGE to the moon.
Many speculate that his recent decision to temporarily stop accepting bitcoin for Tesla caused May’s 40% price correction from $59,000 to $35,000.
One of the greatest minds of our time has also become known as the world’s richest man, implementing creative compensation structures for himself and his shareholders. He is on the cutting edge of technology and business, so it is no surprise that Elon jumped on the Bitcoin train and bought $1.5 billion worth of BTC on Tesla’s balance sheet.
How does one become the richest man alive? In Elon’s case, his imagination has allowed him to discover markets that people didn’t even know existed. However, he also takes full advantage of government subsidies. In 2016, Elon even sued the federal government to gain access to military bidding contracts.
Musk has taken billions worth of subsidies between all of his companies when we look under the hood.
Carbon credits are, among other things, one of the market-oriented mechanisms used to capitalize on free government funding.
Carbon credits are a strategy implemented in 2013 to create a financial incentive for companies to lower their carbon footprint. Companies are allotted a predetermined number of credits which decline over time. Any emissions above the threshold are heavily taxed. Companies with an environmentally friendly business model accumulate unused carbon credits and sell them on a secondary market.
In the first quarter of 2020, Tesla made $518 million off selling carbon credits to other car companies. Looking at their balance sheet, it is clear Tesla relies on these regulatory credits to post profits. Elon has effectively created an OTC market for the vehicle industry, with Fiat Chrysler Automobiles and General Motors as his top buyers. From 2019 to 2021, about $2.43 billion of credits was purchased from just Fiat Chrysler Automobiles.
Now that car manufacturers are coming out with their own electric vehicles, they no longer need to purchase Telsa’s carbon credits. As a result, the secondary market for vehicle-based carbon credits is dying. Michael Burry, noted investor from The Big Short, has taken a $534 million short position on Tesla’s stock with his hypothesis that Tesla’s carbon credit business can only last so long.
Enter bitcoin mining and Elon’s tweets.
The most advanced form of value transfer that the world has ever seen is always fighting FUD regarding its energy usage. Never mind the environmental impact of traditional banking, cloud computing, or the waste made during the battery creation process — only bitcoin’s energy consumption gets questioned by the mainstream media.
There is a perfect storm in public perception to force a new “green bitcoin” initiative, and force another market for carbon credits.
This initiative would include changes to bitcoin’s code and the ability to tag specific bitcoin as “green” or not. Social support from Ark’s CEO, who happens to be a Tesla investor, has already been expressed, and Elon is rallying the North American Bitcoin miners (who account for less than 10% of hash power) to bend to his narrative.
Elon Musk said himself on SNL, “I know I say and post strange things, but that’s how my brain works. To anyone I’ve offended, I reinvented electric cars, and I’m sending people to Mars on a rocketship. Did you also think I was going to be a chill, normal dude?”
We love an eclectic billionaire, and creative capitalism is forever encouraged, but Bitcoin does not need a cult hero. I’m sure Satoshi Nakamoto would agree.
Satoshi’s second gift is green energy, creating financial incentives (and not just tax breaks) to miners who utilize renewable energy solutions. I’d be willing to bet that Bitcoin will serve as a more efficient driver for the future of green energy than government subsidies or Elon’s cryptic tweets.
Eryka Gemma is a digital asset hedge fund consultant and public speaker. Well versed in the crypto currency space, she has helped hundreds of people safely navigate the bitcoin ecosystem.
You can follow her at twitter.com/bankoferyka