Musk's comments on Bitcoin were a "four-dimensional chess move"

Coindesk's director of research Noelle Acheson explains to Yahoo Finance why Elon Musk's recent comments regarding Bitcoin and sustainable energy were more layered than it may have initially appeared.

Video Transcript

- But I want to read to you what Elon Musk, his tweet, was earlier today regarding the Tesla situation.

"We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Tesla will not be selling any Bitcoin. And we intend to use it for transactions as soon as mining transitions to more sustainable energy."

There are a lot of loaded comments in that. To help us make truth out of what might be a new big lie, we're going to invite into the stream the director of research from CoinDesk, Noelle Acheson. It's good to see you again, Noelle. Let's get right to that--

NOELLE ACHESON: Thanks so much for having me. Great to be here.

- You're welcome. Green energy and this discussion we have among all our friends that Bitcoin mining creates or uses massive amounts of energy, which are generated by fossil fuel-burning coal, which destroys the environment. What's the truth?

NOELLE ACHESON: The truth is that we are witnessing some four-dimensional chess. I should caveat that nothing I say is investment advice. It's my opinion, not that of my employer. But Ted, listen. The Tesla people, Elon Musk, they're pretty smart guys. But let's first unpack what happened here.

In February, he bought 1.5, Tesla-- $1.5 billion worth of Bitcoin. And he did say yesterday he's not selling any of that. What he is doing is retracting the right of clients to pay for Tesla's with Bitcoin.

Back then, it was very much a PR stunt, even enabling that in the first place. Because if Bitcoin is a reserve asset, a hedge against the fiat debasement, as they pretty much said with their purchase, then why on Earth would people use it to pay for something?

In much of the world, that makes sense. They don't have access to anything better. It's the best alternative that they have. But let's face it. The cohort that are going to be buying Teslas, they probably have better payment options available to them. They could use their Bitcoin stake to take out a cash loan, for instance, and then still keep Bitcoin as the fiat debasement hedge that Tesla's implicitly recommending that it [? wants. ?]

So what are they doing here? What I think they're doing is they're starting the conversation, or they're kick-starting the conversation up to a different level. This conversation is something that we've been seeing gaining some volume over the past few months.

As Bitcoin's price goes up, obviously, the criticism will intensify. And one of those [? intense ?] criticisms is that Bitcoin does consume, it is powered by, some fossil fuel, some contaminating energy. But what Tesla got totally wrong in their statement is that percentage is increasing. It's not. And that's factually incorrect. It's decreasing. Bitcoin is increasingly powered by renewables.

And I don't think Tesla would buy $1.5 billion of Bitcoin without at least getting some of their facts straight. So what really are they doing here? I think this is a four-dimensional chess PR to them.

- All right, Noelle, as we try to unpack this, I think the reaction in Bitcoin has caught a lot of people by surprise because it is now under $50,000. We're seeing a big move to the downside today. Yes, bitcoin is always very volatile. But do you think that this is bad news for Bitcoin? Or is this something, in a few days, it's all just going to blow over?

NOELLE ACHESON: I think it's, in a few days, it's all going to blow over. Because one thing that's totally guaranteed [? Shawn, ?] is that in our industry, there's always the more fascinating story tomorrow. Just when we think things can't possibly get more interesting, they really do.

And so we saw Bitcoin plummet on this because Elon Musk is a very smart man. And what Tesla does, we should pay attention to. But once people start to poke through the holes in this statement, they're going to see that it is nothing more than a kick-starting of a conversation that really does need to happen anyway.

We have to also remember what else is going on. So the inflation figures come out. And they are going to hit risk assets. I mean, Bitcoin is often touted as an inflation hedge. I think it's more accurate to call it a fiat debasement hedge that's related but not necessarily the same thing.

And with an inflation hedge, you do see risk assets get hit. That's also probably partly in play here. And the fact that Bitcoin has been appreciating quite handsomely since the beginning of the year, some kind of correction at some stage is inevitable.

So part of this is probably the knee-jerk reaction to the Tesla statement, but only part of it. There's a lot of other things going on as well. And I think the Tesla statement is really is no more than a PR stunt, which will blow over.

It will have the effect of kicking the conversation about Bitcoin's energy mix up to a new level, which is very welcome by the Bitcoin community. You've seen on Twitter, you've seen on all sorts of media, people coming out to show that it is increasingly powered by renewables. That's the conversation that Tesla, I'm sure, was very happy to get out there.

- OK. The environmentalists watching us will be pleased by that. Let's talk about the investors. You just used the term that it's better considered as a fiat currency debasement hedge. We're about to borrow trillions more, whether it's $600 billion or a trillion for infrastructure. So there might be debasement of the US dollar. Wouldn't we-- shouldn't we be seeing Bitcoin go higher? What might we be missing?

NOELLE ACHESON: Well, maybe we can look at the fact that it is going higher, that it's not going down even more, given the inflation shock. The previous guest was talking about the inflation surprise that came up.

And let's face it. If the inflation surprise is going to keep yields up, that is going to affect risk assets across the board. One of the things that has been powering Bitcoin over the past few months is that yields are so low that it doesn't matter that Bitcoin does not have a yield.

We have the same kind of argument, generally, not recently, but generally, powering gold as well. When yields are low, yield-free assets tend to do better, especially in the case when we're talking about limited supplies. When real going up, then risk assets tend to get hit. And that's very much what we're seeing here.

Longer term, however, as Tesla, I think, is reminding us with all of this, fiat debasement is the bigger worry. Fiat debasement comes through increasing the money in the money supply, which nobody can argue is certainly happening at unprecedented rates. And that's where Bitcoin can shine.

- Always love it when the people from CoinDesk give us a better insight into what's happening with crypto and Bitcoin. Noelle Acheson is CoinDesk's director of research. We appreciate your coming.