Tesla Investment in Bitcoin Could Mean More Work for Xinjiang Coal Miners
There is a good chance that any new bitcoins generated after Elon Musk boosted the crypto will be sourced using cheap coal power in China’s Xinjiang.
Cheap Reserves of Fuels Make the Province Suitable
The region, which has risen to prominence in recent years for complaining about harassment of the Uighur Muslim minorities, is also a center for bitcoin production.
According to researchers at Cambridge University, as of April 2020, nearly two-thirds of global production was in China, and about a third in Xinjiang.
The main draw is the cheap energy it takes to run computers that run complex “proof of work” equations that validate transactions without a third party, which makes up the bulk of miners’ fees.
However, unlike nearly carbon-free production in places like the Nordic region, most of the Xinjiang electricity is still generated from pollution produced by coal-fired power plants.
Ms. Amanda Al, an analyst at BloombergNEF, said cheap and reliable electricity was essential and it affects how much profit miners can make.
The power industry such as aluminum smelting and polysilicon manufacturing has long been attracted to Xinjiang because the capacity there is very low, only 0.22 yuan ($ 0.04) per kilowatt-hour, compared to 0.6-0.7 Yuan in kilowatt-hours in central China according to BloombergNEF.
While Xinjiang has a fast-growing renewable energy sector and wind turbines scattered over Urumqi’s hills, Xinjiang still accounts for less than a quarter of the electricity generated last year.
A 2018 BloombergNEF study presented the fact that the possibility is equivalent to around 0.2% of China’s total electricity demand in 2017.
Tesla Bought $1.5 Billion in Bitcoin
Tesla announced on Monday that it had bought $ 1.5 billion worth of bitcoins.
In a statement with the Securities and Exchange Commission, the company said buying Bitcoin was more flexible to diversify further and maximize their returns.
The tech company also pointed out that it would begin accepting payments in Bitcoin in exchange for its products, “subject to applicable law and on a limited basis.” It will make Tesla the first major car manufacturer to do this. With $ 1.5 billion in bitcoin, Tesla will receive liquidity in cryptocurrency as soon as it accepts it for payment.
The company’s move to Bitcoin represents a significant percentage of CEO Elon Musk’s investment; the company had more than $19 billion in cash at the end of 2020.
The move raised questions about Elon Musk’s recent behavior on Twitter, where he was credited with driving up the prices of cryptocurrencies such as Bitcoin and Dogecoin by posting positive news encouraging more people to buy the digital currencies.
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