After the CEO of Tesla, Elon Musk tweeted the suspension of bitcoin as a payment option for its vehicles, the price dipped more than 7% within the hour of the tweet. This tweet comes hours after Elon Musk asked the Twitter community if they would like Tesla to accept dogecoin as a means of payment. Elon Musk said the reason for this suspension is because of concerns about the use of fossil fuel for bitcoin mining. Bitcoin is currently trading less than $50,000 extending its dip to about 12%.
Elon Musk said Tesla would not sell any bitcoin and intends to use bitcoin for transactions as soon as mining transitions to more sustainable energy.
“We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction,” Musk said.
The digital currency is created when high-powered computers are competing against each other to solve complex mathematical puzzles, which is an energy-intensive endeavour that often relies on electricity generated from fossil fuels, particularly coal. At current rates, such bitcoin “mining” devours about the same amount of energy annually as the Netherlands did in 2019, the latest available data from the University of Cambridge and the International Energy Agency shows.
Tesla revealed in February it had bought $1.5bn of bitcoin, before it began accepting it as payment for cars in March, driving a roughly 20% surge in the world’s most widely held cryptocurrency.
On Wednesday, Edward Moya, a senior market analyst at currency trading firm OANDA, said that Musk was getting ahead of investors focused on sustainability. “The environmental impact from mining bitcoins was one of the biggest risks for the entire crypto market,” Moya said. “Over the past couple of months, everyone disregarded news that bitcoin uses more electricity than Argentina and Norway.”
In an “emergency press conference”, sometimes crypto trader and Barstool Sports founder, Dave Portnoy, asserted that Musk “just tried to tank Bitcoin,” stating: “[Musk] has been pulling the levers like the Wizard of Oz on crypto, and everyone’s following his every move — he’s sending Dogecoin up, he’s sending Bitcoin down, this is bullshit […] Elon, you have a responsibility when one second you say to buy something, and the next second you don’t – that’s playing with people’s futures and their fortunes.”
Elon Musk believes strongly in cryptocurrencies but he also advocates for clean technology. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” he said.
Going forward, it is believed that Tesla will switch payment to another cryptocurrency that is born of proof of stake (PoS) rather than proof of work (PoW). This means Ethereum might be the next payment method for the electric car company.