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Elon Musk Backtracks on Bitcoin: Tesla Will Not Accept It to Purchase Its Vehicles It’s amazing what a single tweet can do. In a surprising reversal, Tesla Chief Executive Elon Musk announced in a Twitter post on May 12 that the electric automobile manufacturer would no longer accept bitcoin as payment from its customers.
The Ride Up the Roller Coaster
The post comes on the heels of a much-ballyhooed SEC filing on February 8 that stated the company had invested $1.5 million of its cash reserves into the cryptocurrency and that it would begin accepting BTC payments for its products. True to the filing, on March 24, Musk followed up with an eight-word tweet: “You can now buy a Tesla with bitcoin.”
The ensuing publicity from the February announcement resulted in the digital currency skyrocketing 16 percent that same day. Since then, there has been a surge of interest in cryptocurrencies from traditional financial firms and corporations such as Mastercard and Bank of New York Mellon.
What Goes Up Must Come Down
If Elon Musk can cause the value of cryptocurrencies to rise, the self-described Techno-king has proven he is just as capable of causing them to plunge. Musk’s May 12 tweet resulted in bitcoin’s falling nearly 17 percent. It gained back some of its losses in Asian trading but remained down by 12 percent the following day. The cryptocurrency Ethereum also took a slide.
In his stated reasoning for his decision to suspend the use of the world’s largest cryptocurrency, Musk cited its huge carbon footprint. “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk wrote. He said Tesla would not be selling any of their holdings and still intends to use it as soon as mining transitions to more sustainable energy. Musk said the company is also considering other cryptocurrencies that use far less energy.
A Question of Due Diligence
Long an outspoken proponent of environmental sustainability, it seemed to some that Musk’s earlier pledge to accept the digital currency as a payment method was a bit disingenuous and could ultimately harm Tesla’s environmentally-friendly image.
The cryptocurrency is created through a process called “mining” whereby transactions are verified using powerful, specialized computer servers that consume vast amounts of energy. According to data from the University of Cambridge’s Centre for Alternative Finance, China miners are responsible for about 70 percent of production and they rely heavily on fossil fuels to operate their servers. According to the Centre, the digital currency company consumes more energy than did all of Sweeden or the Netherlands in 2019.
Dan Ives, an industry analyst and managing director of equity research at Wedbush Securities described Musk’s change of heart as “head-scratching.” In a note sent to ABC News, Ives wrote that the method for mining the cryptocurrency had not changed in the previous three months, so the decision to backtrack was surprising and confusing to both the electric automobile manufacturer as well as to crypto investors.
The Ride Continues
If Musk could upend the cryptocurrency market with an eight-word tweet, he recently topped himself by doing it with just one.
On May 16, self-described “crypto-analyst” tweeted at Musk that “Bitcoiners were going to slap themselves next quarter” when they found out Musk’s company dumped what remained of its holdings.
Musk tweeted his reply, “Indeed.” The single word tweet caused the cryptocurrency to slide below $45,000, a low it hadn’t seen in months.