Tesla’s Musk is reversing course on Bitcoin finance

Tesla has stopped using Bitcoin to purchase its vehicles for climatic reasons, CEO Elon Musk said in a tweet, reversing the company’s stance in the face of outcry from some environmentalists and investors.

Bitcoin, the world’s largest digital currency, fell more than seven percent after the tweet, trading at $ 52,669.

Tesla announced in February that it had bought $ 1.5 billion worth of Bitcoin before accepting it as payment for cars in March, causing the world’s most widely used cryptocurrency to surge by around 20 percent.

Musk said Wednesday Tesla will not sell bitcoin and intends to use bitcoin for transactions once mining moves to more sustainable energy.

“We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” wrote Musk.

The digital currency is created when powerful computers compete against other machines to solve complex mathematical puzzles. This energy-intensive process is currently often based on electricity generated with fossil fuels, especially coal.

At current rates, such bitcoin mining consumes about the same amount of energy annually as the Netherlands did in 2019, according to the latest available data from Cambridge University and the International Energy Agency.

Some investors expressed doubts about using Bitcoin for Tesla purchases months ago.

“We are of course very concerned about the level of carbon dioxide emissions from mining Bitcoin,” said Ben Dear, CEO of Osmosis Investment Management, in February, shortly after Tesla’s Bitcoing holdings went public.

Osmosis is a sustainable investor with approximately $ 2.2 billion in assets under management and holding Tesla shares in multiple portfolios.

On Wednesday, Edward Moya, a senior market analyst at forex trading firm OANDA, said Musk was one step ahead of sustainability-minded investors.

“The environmental impact of mining bitcoins was one of the biggest risks to the entire crypto market,” said Moya.

“For the past few months everyone has ignored the news that Bitcoin is using more electricity than Argentina and Norway.”

Chris Weston, head of research at broker Pepperstone in Melbourne, said Musk’s reaction is a blow to Bitcoin but an acknowledgment of the currency’s carbon footprint.

“Tesla has the image of being environmentally friendly and Bitcoin is clearly the opposite of that,” Weston said.

Musk himself is a firm believer in digital currencies, but he is also committed to clean technology.

“Cryptocurrency is a good idea on many levels and we believe it has a bright future, but it cannot result in high environmental costs,” said Musk.

“We also consider other cryptocurrencies that consume <1%[percentofbitcoinenergy/transaction"[percentofbitcoin'senergy/transaction"[ProzentderEnergie/TransaktionvonBitcoinverbrauchen"[percentofbitcoin'senergy/transaction"

The dominance of Chinese bitcoin miners and the lack of motivation to swap cheap fossil fuels for more expensive renewable energies could mean that the emissions problem can only be fixed quickly.

Chinese miners make up about 70 percent of Bitcoin production, data from the University of Cambridge’s Center for Alternative Finance shows.

During the rainy summer months they usually use renewable energy – mostly hydropower – but for the rest of the year they use fossil fuels – mainly coal.

According to blockchain analytics firms, it is theoretically possible to track the source of bitcoin, which increases the possibility that a premium could be levied on green bitcoin.

Stronger climate change policies from governments around the world could also help.

Some Bitcoin proponents note that the existing financial system – with its millions of employees and computers in air-conditioned offices – also uses large amounts of energy.

Musk was a fan of other cryptocurrencies and this year fired tweets that popularized the once obscure Dogecoin for digital currencies.

Musk said on Sunday that his commercial rocket company SpaceX will accept the meme-inspired cryptocurrency as payment for the launch of a lunar mission next year.

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