Tesla will no longer accept Bitcoin as payment, CEO Elon Musk announced on Wednesday, citing environmental concerns.
“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,” Musk said on Twitter. He added that cryptocurrency is a “good idea on many levels,” but its promise cannot come at a “great cost to the environment.”
Tesla, he said, would not sell any of its Bitcoin holdings. Following Musk’s comments on Twitter, the price of Bitcoin dropped about 5% to $51,847. Tesla’s stock fell 4.4 percent on Wednesday.
Wedbush Securities analyst Dan Ives described Musk’s reversal as “head-scratching.”
“Tesla is now accepting payments. Bitcoin was seen as a significant move forward for the crypto industry. Still, now Tesla’s/reversal Musk will have a short-term negative effect on Bitcoin, and the crypto ecosystem as the market digests this perplexing news from one of its most ardent backers, Musk “In a note to investors, Ives said.
According to a 2019 report conducted by researchers at the Technical University of Munich and the Massachusetts Institute of Technology, the entire Bitcoin network was responsible for up to 22.9 million tons of CO2 per year in late 2018, which is comparable to a big Western city or a whole developing country like Sri Lanka. Last year, total global greenhouse gas emissions from the combustion of fossil fuels were about 37 billion tons.
Bitcoin is powered by machines, which are powered by electricity. The number of computers and the energy required to power them is increasing, and the increasing value of Bitcoin is directly related to the amount of energy it consumes.
Despite these environmental issues, Tesla announced in February that it had invested approximately $1.5 billion in Bitcoin and that it would soon begin accepting the digital currency as payment for cars. According to securities filings, Tesla’s Bitcoin assets were worth approximately $2.5 billion as of March 31.
In the first three months of the year, Tesla’s profits totaled $438 million, the company’s highest-ever earnings for a single quarter. However, a quarter of those earnings, or $101 million, came from selling a portion of the company’s bitcoin holdings.
According to JPMorgan Chase analyst Ryan Brinkman, except for the company’s gain on Bitcoin and a separate regulatory credit, Tesla’s core business of selling cars and solar panels lost $25 million in the period.