Bitcoin takes a nosedive after Elon Musk’s Tesla reverts decision to accept Bitcoin

  • Tesla will no longer be accepting Bitcoin as a form of payment citing environmental impact.
  • CEO Elon Musk reiterated that cryptocurrencies are a good idea and the electric company was looking into others with a lesser impact.

When Tesla announced the purchase of Bitcoin worth $1.5 billion and started accepting Bitcoin as a form of payment for its electric vehicles, they became one of the largest price influencers. As such, the entire community was aware that any drastic decision by the company would greatly impact prices. This was evident when the company revealed at the end of Q1 that it had sold 10 percent of the Bitcoin holding to prove liquidity. For a few hours, there was some panic and a brief dip in prices.

In the last 24 hours, the company has made another radical decision that has seen Bitcoin stumble. On Wednesday, founder Elon Musk confirmed on Twitter that the company was halting Bitcoin payments. The CEO cited environmental impact for the decision.

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.

Tesla and Elon Musk have recently come under scrutiny from environmental conservatives for endorsing Bitcoin. The digital asset uses the proof of work (PoW) consensus mechanism that uses a lot of power. In fact, some reports have concluded that mining Bitcoin uses the same electricity as some entire countries.

More and more miners are switching to renewable energy but this has not been swift enough. Tesla was accused of being hypocritical with the environmental impact imposed by Bitcoin offsetting the efforts by its electric cars. Ripple co-founder Chris Larsen had suggested that Bitcoin should switch to Proof-of-Stake since PoW is outdated. He noted this about Tesla:

Consider Tesla’s recent investment in bitcoin, which resulted in an over $5,000 per bitcoin price increase. Incredibly, this almost certainly wiped out Tesla’s entire fleet’s annual CO2 savings.

Another key issue that market observers have noted is that Tesla stock prices have been correlated to Bitcoin’s prices since the huge purchase and continued crypto engagement by Elon Musk.

Is Tesla ready to replace BTC with DOGE?

In the wake of the announcement, investors are concerned that Tesla could dump its $1.5 billion holdings. However, Elon Musk has confirmed that the company has no plans to sell. He wrote,

Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.

He further added that the company is looking into new cryptocurrencies that use less than 1 percent of Bitcoin’s energy/transaction. As we reported, Elon Musk recently asked his followers whether Tesla should start accepting Dogecoin (DOGE). At the time, it seemed that DOGE would be joining Bitcoin but now it seems it could be replacing it. In a Twitter poll that saw just under 4 million participate, 78.2 percent voted in favor of accepting DOGE.

Bitcoin pulls market cap down

Following the announcement, Bitcoin took a nosedive, wiping out at least 10 percent in a few hours. At the time of press, Bitcoin was trading at $51,000 after a rebound from the $45,000 lows. With it, the digital asset has pulled a majority of top coins and the entire market cap is down by at least 11 percent at the time of press.

DOGE, purported as the new Bitcoin by some, has not been spared and is down by 12 percent at the time of press. The token is down by roughly 30 percent from the last 7 days.

About Author

John Kiguru is an astute writer with a great love for cryptocurrency and its underlining technology. All day he is exploring new digital innovations to bring his audience the latest developments.

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