Elon Musk crashes Bitcoin price by cancelling BTC payments for Teslas
The self-proclaimed "Dogefather" has single-handedly crashed the price of Bitcoin with a single tweet.
Bitcoin is facing its biggest price drop in months, down 15.6% to US$47,602 at the time of writing, following a tweet by Elon Musk announcing that Tesla would no longer accept Bitcoin payments.
The announcement is a nearly complete reversal of Tesla's public stance on Bitcoin, after it publicised that it would accept Bitcoin payments for new cars earlier this year, alongside a whopping US$1.5 billion investment in Bitcoin back in December last year.
Citing environmental concerns, Musk said that Tesla would "suspend" Bitcoin payments due to concerns around fossil fuel use for Bitcoin mining. Mining is the process of using computers to authorise Bitcoin transactions and keep the network secure, which uses massive amounts of computing power and energy in the process.
Musk refrained from ditching Bitcoin entirely, saying that Tesla would not be selling any of its Bitcoin reserves (estimated to be worth several billion) and that "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".
Bitcoin and fossil fuels
The final part of Musk's statement said that Tesla would resume accepting Bitcoin payments once "mining transitions to more sustainable energy", which many would argue is already the case.
Multiple reports published from 2019 onwards suggest that while Bitcoin is deeply energy-intensive, a large amount of it comes from renewable sources.
According to the Cambridge Center for Alternative Finance, Bitcoin accounts for 0.55% of global energy consumption, which is comparable to the annual output of Sweden. The same report estimates that 39% of this is from renewable sources, while a report by Coinshare suggests the figure is closer to 75%.
An investigation by Harvard Business Review proposes that renewables play a large part in Bitcoin mining due to economics. Simply put, it is more profitable to mine Bitcoin using renewables, especially Hydro-Electric which accounts for up to 50% of Bitcoin mining during the wet season in China – arguably the heartland of Bitcoin mining.
Ironically, Musk has previously praised Bitcoin's green energy credentials, agreeing with a tweet by Twitter founder Jack Dorsey that "Bitcoin incentivizes renewable energy".
Disclosure: The author owns a range of cryptocurrencies including BTC at the time of writing