Tesla has suspended the use of Bitcoin when purchasing their vehicles due to concerns around the use of fossil fuels and emissions involved with mining, causing the value of Bitcoin to fall by over 10%.
CEO of Tesla, Elon Musk, made the announcement in a tweet, writing: “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.
“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.”
Tesla, Musk and Bitcoin have had an interesting couple of months, with Musk investing $1.5billion dollars into the cryptocurrency back in February after announcing they intended to start accepting it as payment. This move caused the price of Bitcoin to jump 17% to $44,220, a then-record high.
At the time, many thought that Tesla’s investment was a “game-changer” for Bitcoin, as it was the first major company in the automobile sector to announce its intentions to offer cryptocurrency as a future payment option.
“Tesla is hardly considered a traditional company, but when one of the largest companies in the world starts to hold Bitcoin on its balance sheet as a substitute for cash, the market takes notice,” Paul Hickey of Bespoke Investment Group wrote in a note to clients.
A blow for Bitcoin
However, Musks recent tweet will likely be seen as a huge blow for the cryptocurrency, as bringing it into the mainstream and almost immediately spurning it again highlights to consumers how volatile – and potentially damaging – it can actually be.
There have been countless debates around cryptocurrencies and the potential risks when investing, despite the countless news stories of people getting rich quick. The environmental concerns of such currencies are relatively less well known, though is becoming more mainstream knowledge, with the Bitcoin industry alone estimated to use the same amount of energy as the annual amount used by a country the size of Malaysia.
Bitcoin is created by miners using high powered computers that process transactions and solve complex mathematical puzzles. The process is very energy-intensive and relies on energy generated by fossil fuels, particularly coal as Musk pointed out.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Some believe that this rapid backtrack on Bitcoin is an attempt by Tesla to cater to investors who have concerns about climate change and sustainability
“Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG,” Julia Lee from Burman Invest told the BBC.
“But a cynic might suggest that this is just another move by Elon Musk to influence the cryptocurrency market, as he has done on so many other occasions,” she added, in reference to Musks previous dealings with Bitcoin. His tweets about the once-obscure digital currency Dogecoin also helped to turn it into the worlds fourth biggest cryptocurrency after being started as a social media joke.
However, many were quick to jump to Bitcoins defence about the future of its emissions after the announcement, claiming that even the mainstream financial system with its numerous workers, buildings and computers also uses large amounts of energy, often created by fossil fuels.
Viktor Prokopenya, a London-based Fintech investor said: “Tesla’s value has increased more than all the automotive companies in the world, and its founder Elon Musk is now the richest man on earth. Cryptocurrencies have emissions now but in the future – when things will move to proof of stake – then it will have zero emissions.
“It is true that many cryptocurrencies are at the moment based on ‘proof of work’ or mining, and are not using energy very effectively. However, this will change. One hundred years ago, people made the first car. Those cars had very big carbon emissions, but that did not mean we stopped creating cars – we improved the technology. Society has now created a zero-emissions car, and we are moving towards a world where all cars will be clean. Cryptocurrencies are evolving in the same way. They are currently a very young technology and we are now moving from ‘proof of work’ to ‘proof of stake’ technology. So it will not take us a hundred years to develop clean technology, as it did with the automobile. It will probably take five years.”