The price of bitcoin and other cryptos have come roaring back after they plummeted last week following comments from Elon Musk and Chinese regulators.
The price took a major hit when Mr Musk announced Tesla would no longer accept bitcoin as payment due to concerns about the environmental impact of bitcoin “mining”.
China’s powerful State Council also sent investors scurrying with a statement issued late on May 21, saying more regulation was needed to protect China’s financial system from crypto trading and mining.
The State Council said it was necessary to “crack down on bitcoin mining and trading behaviour, and resolutely prevent the transmission of individual risks to the social field”.
“We should be more alert and look for potential risks.”
The statement came after a warning against crypto trading by three state-backed industry associations — the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.
Crypto prices in Australia
The price of bitcoin has made a stunning comeback since hitting a low of (AUD) $40,359.19 on May 24, climbing to $49,395.19 at 12pm AEST.
Ethereum has also climbed from its low of $2246.05, rising to $3514.24.
XRP has jumped from $0.845168 to $1.25.
Dogecoin has also strongly bounced back from a low of $0.322854 to $0.428350.
Overall the market has soared by about $387.30 billion after the brutal week that wiped off more than $1 trillion, according to Forbes.
Biggest myth about bitcoin destroyed
Bitcoin mining is the process by which new bitcoins are entered into circulation and involves computers solving complex but useless mathematical problems.
This process consumes considerable amounts of electricity.
Bitcoin mining uses the same amount of energy annually as the Netherlands did in 2019, according to data from the University of Cambridge and the International Energy Agency.
Miners in China account for about 71 per cent of bitcoin mining energy consumption, with miners in the US and Russia responsible for about 7 per cent each.
However, bitcoin mining may not have the devastating environmental impact that some people claim.
Proof-of-work crypto mining
Sean Ratka and Francisco Boshell from the International Renewable Energy Agency argue that renewables and energy efficiency are addressing the rising energy usage of cryptocurrency mining.
Also, there’s a shift towards “proof-of-stake” (POS) rather than “proof-of-work” (POW) mining.
The POW model uses a “consensus mechanism that requires massive amounts of computational power”, Fortune reported.
The POS model, put forward by ethereum, “requires less computing power because it doesn’t reach consensus by having miners race to complete the same puzzle”.
The combined computational power that is being used to mine and process transactions is known as the “hashrate”.
It’s estimated that 39 per cent of POW mining is already powered by renewable energy, primarily hydro-electric energy.
MicroStrategy CEO Michael Saylor told CNN that China was using “clean renewable energy” through the production of hydro-electric power.
“It’s a great success story. We’re using energy coming off of dams that otherwise would been wasted and lost forever to the world.
“There is dirty coal in China. The Chinese have their own environmental goals and they’re working to clean up all of their emissions.”
He said Iran was also working to shut down “illegal” bitcoin mining.
Mr Saylor predicted that hash power would shift to the US and other parts of the world.
“As expensive dirty comes offline, more and more of the hash power switches to clean sustainable energy and that’s a great thing.
“Any jurisdiction that doesn’t support mining will drive the hash power to jurisdictions that do support mining.
“Bitcoin is a solution to anybody that has cheap renewable energy and doesn’t have a customer for it.”
He claimed bitcoin is the “greatest customer for renewable energy in the world – in the history of the world”.
Mr Musk revealed he has a positive outlook regarding the future of bitcoin mining.
“Spoke with North American Bitcoin miners. They committed to publish current and planned renewable usage and to ask miners WW to do so. Potentially promising,” he wrote on Twitter on Wednesday.