The price of Bitcoin fell steeply to dip below $50,000 after Tesla chief executive Elon Musk said over Twitter the electric car company would stop accepting the crypto in payment on environmental grounds.
Musk and Tesla’s endorsement of bitcoin has helped fuel the cryptocurrency’s recent rally but his 12 May social media post pulled back from that dramatically.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal,” Musk said in his tweet.
Musk said Tesla would not sell any of its bitcoin and would resume using the cryptocurrency for transactions “as soon as mining transitions to more sustainable energy”.
Tesla began accepting payments for its cars in bitcoin earlier this year and also bought $1.5bn of the cryptocurrency in the first quarter.
Musk said the company had suspended vehicle purchases using bitcoin because of concerns over the crypto’s environmental impact.
Following Musk’s tweet, the value of bitcoin fell sharply and Tesla’s share price also dipped in after-hours trading.
Bitcoin fell from $54,602 at 11pm GMT on 12 May to a low of $47,720 at 1.14am GMT on 13 May according to Coindesk, a fall of nearly $7,000.
Bitcoin’s price later bounced back above $50,000 and was trading at $51,086 at 7.50am GMT on 13 May.
Bitcoin’s market capitalisation fell to $951.8bn following Musk’s tweet, having been the first crypto to amass a market cap of over $1tn in February amid enthusiastic support from Tesla and Musk.
Tesla later sold some of those holdings, in a move that helped boost the company’s first quarter results.
Crypto mining is controversial because of its outsized environmental footprint. Bitcoin is mined by networks of computers that solve challenges in exchange for the cryptocurrency.
Bitcoin mining consumes about 148 terawatt-hours of energy annually, the Cambridge Centre for Alternative Finance estimates. That is more than Sweden uses in a year.
Critics have previously slammed Tesla’s endorsement of bitcoin, arguing that its support for the cryptocurrency weighs on its environmental credentials as an electric car company.
“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,” Laith Khalaf, financial analyst at AJ Bell said.
“Tesla’s decision certainly puts pressure on other big companies who accept Bitcoin to 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,” he added.
Musk’s tweet also hit the price of other cryptos such as dogecoin and ethereum, wiping more than $300bn from the overall market capitalisation of cryptocurrencies.
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