In a shocking U-turn on cryptocurrencies, Tesla CEO Elon Musk has announced that the company would no longer accept Bitcoin as payment for Tesla vehicles. Bitcoin and other popular cryptocurrencies sank from 12% to 20% after the announcement. Some respite came after billionaire investor Mark Cuban came out in defense of Bitcoin’s environmental record.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment,” Musk wrote.
Musk cited concern over the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” especially coal. Nearly 80% of cryptocurrency trade is powered by Bitcoin miners in China, due to its inexpensive electricity.
He went on to share a graph that shows the recent spike in energy consumed by Bitcoin transactions, which stood at an annualized rate of 511 Terawatt-hour.
As of the announcement, Bitcoin (BTC) fell by over 13%, to $49,705 per coin, as investors priced in the loss of a prominent backer. When Musk first announced Tesla would accept Bitcoin in February 2021, its price jumped as much as 20%.
Ether (ETH) fell by 12% and had fallen as low as $3,608 per coin. The currency powering the Ethereum network had had a great run, and some were predicting it would reach $10,000. Litecoin (LITE) plummeted 16% and Ripple (XRP) lost 12%.
Dogecoin was the biggest loser, plummeting by more than 20% to $0.39 per coin. Dogecoin investors had hoped the coin would reach $1 in value, and that Musk would continue “pumping” it.
As I have written just a day prior to the announcement, Dogecoin investors will have to come to terms with the fact that Musk might just get bored of Doge memes and move on. What happened was arguably worse, and the meme crypto still has its relative weaknesses to other cryptocurrencies.
Musk claimed that Tesla will not be selling any of its Bitcoin until mining costs drop. He also announced that Tesla would be looking at cryptocurrencies that use less than 1% of Bitcoin’s energy usage per transaction.
Musk is not the only tech billionaire that raised concerns about the environmental impact of Bitcoin. Bill Gates, co-founder of Microsoft raised alarm over Bitcoin in March, stating that “Bitcoin uses more electricity per transaction than any other method known to mankind.”
A single bitcoin transaction uses roughly 707.6 kilowatt-hours of electrical energy–equivalent to the power consumed by an average U.S. household over 24 days, according to Digiconomist.
Some respite do crypto investors came when billionaire investor Mark Cuban came out to defend Bitcoin. He responded to Musk’s tweet by stating that Bitcoin has a lower environmental impact than gold, and traditional banking.
We at https://t.co/VUydpLFzGh will continue to accept BTC/Eth/Doge because we know that replacing Gold as a store of value will help the environment https://t.co/bs7NvnJY8A and https://t.co/ELhbuLOBRV shrinking big bank and coin usage will benefit society and the environment https://t.co/zu08F0STEQ
— Mark Cuban (@mcuban) May 12, 2021