Bitcoin price plummets as Musk backtracks on support for cryptocurrency
Elon Musk back peddled on his support for bitcoin on Wednesday as the Tesla chief announced the company was suspending its plans to receive payments for its vehicles in the cryptocurrency.
The electric car manufacturer drew attention to concerns over its consumption of fossil fuels via a tweet. Musk said that bitcoin’s future “cannot come at great cost to the environment”.
Over the past 24 hours bitcoin is down by over 11% to $50,276 as perhaps its most prominent supporter delivered the warning against it. Year-to-date the cryptocurrency remains up by 70%.
Back in February Tesla announced that the company had purchased $1.5bn worth of bitcoin, in addition to pledging to accept bitcoin payments, causing a surge in the price of the digital currency to a record high of $44,100.
Tesla has already sold some of its bitcoin holding, on which it made a $101m profit, however it has said that it will not be selling any more.
Previously Musk has agreed with Twitter founder Jack Dorsey, who said that bitcoin “incentivises” renewable energy, which would appear to contradict his recent statement. While studies have suggested that bitcoin’s carbon footprint is equal to some of the world’s major cities, including research at Cambridge University, which said it uses more energy every year than the whole of Argentina.
Laith Khalaf, financial analyst at AJ Bell, commented on the significance of the news and what the future may hold for bitcoin, following Elon Musk’s statement.
“Tesla and Bitcoin were always odd bedfellows, given the environmental credentials of the electric car maker, and the colossal amount of energy consumed by the cryptocurrency. Musk hasn’t closed the door on Bitcoin entirely, and Tesla says it will return to using the cryptocurrency once it transitions to using more sustainable energy. Even if that happens, one could question whether that energy couldn’t be used more productively in the global economy, rather than solving a payments problem that for most people, simply doesn’t exist,” Khalaf said.
Bitcoin backers will be wondering where this leaves the future of the cryptocurrency.
“Environmental matters are an incredibly sensitive subject right now, and Tesla’s move might serve as a wake-up call to businesses and consumers using Bitcoin, who hadn’t hitherto considered its carbon footprint. Tesla’s decision certainly puts pressure on other big companies who accept Bitcointo review their practices, because boardrooms will now be wary about getting it in the ear from ESG investors on the shareholder register. This highlights that the long-term adoption of cryptocurrencies by businesses, consumers and investors is still highly uncertain, as Tesla itself has pointed out,” added Khalaf.