Tesla CEO and The self-proclaimed Technoking puts the company’s stance on Bitcoin in the background and has suspended the purchase of its electric vehicles with the cryptocurrency.
The change in stance, transmitted via tweet, comes just a few weeks after Tesla’s CFO and the title of “Master of Coin”. Zach Kirkhorn said the company believes in bitcoin’s longevity despite its volatility. Musk’s tweet sent Bitcoin price down (and fell) more than 4%. The price of Bitcoin was down more than 7% during the day, although some of that decline came before Musk’s tweet:
Tesla has suspended Bitcoin vehicle purchases. We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.
Cryptocurrency is a good idea on many levels and we believe it has a bright future, but it cannot result in high costs for the environment.
Tesla will not sell Bitcoin and we intend to use it for transactions once mining moves to more sustainable energy. We also look at other cryptocurrencies that consume <1% of Bitcoin's energy / transaction.
Tesla invested $ 1.5 billion in Bitcoin that quarter and then trimmed its position by 10%, Kirkhorn said during the company’s quarterly earnings call in April. This sale had a “positive” impact on the company’s profitability in the first quarter.
Kirkhorn said Tesla turned to Bitcoin to store cash and still have instant access to it, while getting a better return on investment than traditional central bank-backed safe havens. Of course, the higher returns on the volatile digital currency come with a higher level of risk.
If you are getting whiplash from this announcement, you are not alone. Tesla originally announced in March that it would accept Bitcoin as a means of payment in the United States. But Tesla’s technoking Elon Musk is known for drastically impacting the crypto market with just a tweet of his thumbs. Every time the man tweets a picture of a Shiba Inu, the joke coin called Dogecoin in the stocks sores.
In anticipation of Musk’s appearance on Saturday Night Live, many expected the coin to hit $ 1, but when the “Dogefather” admitted (as a joke) that the currency was a hustle and bustle, the price of the coin plummeted 30% .
When it first became known that Tesla had bought $ 1.5 billion worth of Bitcoin, investors, analysts, and money managers at some of the country’s largest banks realized that it posed risks for the company. Others noted that it could damage its reputation.
Bitcoin works using what is known as a “proof of work” consensus. This means that the network relies on mining to continue operating. Most of the Bitcoin mining is done in Russia and China. Until the energy network is decarbonised, as TechCrunch already determined in February, mining Bitcoin will remain a dirty business, although many mining companies now use partially renewable energies. An investor told TechCrunch that the cost per transaction has only gotten higher from an energy intensity perspective.
Musk hinted that other cryptocurrencies are on the table. These will likely be the ones using consensus mechanisms to demonstrate the stake that networks like Ethereum have committed to transitioning because of their energy efficiency.