Tesla CEO Elon Musk reported Wednesday night that the electric vehicle company will stop accepting bitcoin as a form of payment to purchase its cars due to its environmental impact. The decision comes just 50 days after that possibility was opened to its customers in the United States, and has had immediate repercussions: as soon as the news was known, the price of bitcoin fell sharply. After twelve in the morning Spanish time it was trading at $ 49,600, with losses of more than 12%.
The measure was disclosed in true Musk style, with a message on the social network Twitter, where it has more than 54 million followers. “We are concerned about the increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which emits more than any fuel,” the Tesla boss wrote.
Energy consumption for the production of cryptocurrencies has exploded in recent years. An analysis by the Center for Alternative Finance at the University of Cambridge calculates that only with bitcoin spending is higher than in countries such as Finland, Switzerland or Argentina. The contradiction of selling electric cars, a vehicle called to bury the carbon emissions model of the automobile industry, and at the same time allow the use of an asset as polluting as bitcoin to buy their cars, was widely pointed out by analysts when Tesla reported that it accepted it as a means of payment, but the ecological impact did not stop it then.
Musk’s reversal does not close his love affair with cryptocurrencies. “They are a good idea on many levels and we believe they have a promising future, but this cannot have a great cost to the environment,” he defended. In addition, in his message on Twitter, the founder of Tesla opened the door to exchange bitcoin for other more sustainable cryptocurrencies that use less energy in transactions. For now, in any case, Musk’s intention is to put these types of operations on hold until their environmental impact is reduced. And it probably won’t extend bitcoin car sales to the international market either as it had planned to happen before the end of this year.
Tesla’s move to authorize bitcoin as a means of payment raised speculation about a possible cascade of companies imitating it, but given the high volatility of the price of the cryptocurrency, this domino effect has not taken place for now, although the presence has increased of institutional investors in the value.
Tesla owns more than 1 billion euros in bitcoins, after investing 1.25 billion and selling 10% of that position “to test its liquidity.” The operation generated more profits in its accounts in the first quarter than the sale of its electric cars, despite the fact that deliveries of these more than doubled with respect to the previous year, with 184,800 sales. Paradoxically, the decision not to accept bitcoin as a means of payment damages the financial position of the firm, which invested in bitcoins to put to work the cash that it does not need in the short term. However, the price of bitcoin is still above what Tesla paid when it made the investment, and the consequences of the decision could be diluted in the coming days. So far this year, bitcoin has appreciated by about 70%, but that balance increases above 10,000% if you look at the last five years.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.