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Tempers are flaring in the current round of Bitcoin FUD, but a longer-term outlook shows that BTC is doing “business as usual.”
Bitcoin (BTC) dropped 17 percent after Tesla CEO Elon Musk attacked the company’s energy consumption — but it’s already recovered.
On Thursday, after falling to $45,600, BTC/USD is trading above $51,000, having recovered more than half of its lost ground.
Proof-of-work doesn’t care
The proof-of-work algorithm in Bitcoin rewards both miners and investors over time because their years of work strengthen the network.
The more Bitcoin exists, the less likely it is to be attacked or for its users to abandon the network in favour of another cryptocurrency.
This is exactly why, through rivalry, Bitcoin remains the cryptocurrency of preference — as many contend, no altcoin will “do Bitcoin” like Bitcoin.
However, when it comes to Musk, proof-of-work is essential for another purpose. Miners have no additional reason to leave the network or bail out only because one famous investor changes their mind on Bitcoin’s merits and the price falls.
This part of the “network effect” implies that Musk actually provides Bitcoin with positive rather than negative attention — as the price demonstrates, his comments and deeds do not affect what Bitcoin is or what it is capable of.
“Why is proof-of-work crucial for bitcoin? Because a valid hash (PoW) is how P2P nodes know that a block is valid, without needing a server or trusted third party,” PlanB, creator of the stock-to-flow family of Bitcoin price models, commented on the phenomenon.
“Bitcoin is dead without PoW!”
Price trends don’t care
Despite its abrupt dive after Musk’s words, Bitcoin’s recent price action speaks more to its resilience to criticism than its susceptibility.
In the end, BTC/USD fell for just two hours before reversing and maintaining higher speeds. Not only that, but the drop is consistent with the market behaviour seen this year and does not break any longer-term price patterns.
The 21-week exponential moving average has been an especially critical amount that has defined the 2020–2021 bull run (EMA). This amount, according to analysts, will determine the market floor during dips — it even kept during the previous bull run high in 2017.
This time, Musk also struggled to overturn the pointer, and the short wick to $45,650 was extinguished when it collided with the 21 EMA on the way down.
Bitcoin energy “consumption” doesn’t care
It’s still a good idea to zoom out when dealing with Bitcoin.
Once the dust settles on Musk’s individual energy critique, the larger “debate” on how environmentally friendly Bitcoin is will continue in his wake. Most of the traditional accusations, on the other hand, have long been debunked as being short-sighted and devoid of proof.
Just last week, Michael Saylor, CEO of major Bitcoin hodler MicroStrategy, gave a public interview, in which he reinforced the lack of merit inherent in claims that Bitcoin is “bad” for the environment.
Responding to Musk, he called Tesla’s decision to stop accepting Bitcoin for payments “ironic.”
“Ironic because no incremental energy is used in a bitcoin transaction,” he wrote on Twitter.
“The energy is used to secure the crypto-asset network, and the net impact on fossil fuel consumption over time will be negative, all things considered.”
Extending one’s time frame is therefore critical to comprehending that Bitcoin is valuable. As Saifedean Ammous, author of the influential book The Bitcoin Standard, often notes, possessing a “low time preference” enables a BTC investor to realise that ignoring sound capital for factors such as the climate wastes more resources on unsound alternatives.
Ammous didn’t hold back this time.
“Unless you’ve also switched your rockets and battery manufacturing to ‘more sustainable energy’ you’re going to look like a clueless big hypocrite here,” he tweeted, alluding to Musk’s other company, SpaceX.
“The world needs sound money far more than it needs your rockets & government-subsidized electric cars.”