Tesla CEO and self-dubbed Technoking is back-pedaling on the company’s stance about bitcoin and has suspended purchases of its electric vehicles with the cryptocurrency.
The change of stance, which was delivered via tweet, comes just weeks after Tesla CFO and dubbed “Master of Coin” Zach Kirkhorn said the company believes in the longevity of bitcoin, despite its volatility. The tweet from Musk sent the price of bitcoin down more than 4% (and falling). The price of bitcoin is down more than 7% for the day, although some of that decrease occurred prior to Musk’s tweet:
Tesla has suspended vehicle purchases using Bitcoin. 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.
Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment.
Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.
Tesla invested $1.5 billion in bitcoin this quarter and then trimmed its position by 10%, Kirkhorn said during the company’s quarterly earnings call in April. That sale made a $101 million “positive impact” to the company’s profitability in the first quarter.
Kirkhorn said Tesla turned to bitcoin as a place to store cash and still access it immediately, all while providing a better return on investment than more traditional central bank-backed safe havens. Of course, the higher yields provided by the volatile digital currency comes with higher risk.
If you’re getting whiplash from this announcement, you’re not alone. Tesla originally announced in March that it would accept bitcoin as a form of payment in the United States. But Elon Musk, the Technoking of Tesla, is known for drastically affecting the crypto market with just a mere tweeting of his thumbs. Every time the man tweets an image of a Shiba Inu, the joke coin called Dogecoin sores in the stocks.
In anticipation for Musk’s appearance on Saturday Night Live, many anticipated that the coin would reach $1, but when the “Dogefather” admitted (as a joke) to the currency being a hustle, the price of the coin crashed 30%.
When it first became public that Tesla had purchased $1.5 billion in Bitcoin, investors, analysts and money managers at some of the country’s largest banks noted that it presented risks for the company. Others noted it could damage its reputation.
Bitcoin functions using what is known as a “Proof of Work” consensus, which means the network relies on mining to continue operating. The bulk of bitcoin mining is conducted in Russia and China. Until the energy grid decarbonizes, as TechCrunch noted back in February, mining bitcoin will remain a dirty business, though plenty of mining operations today do use renewable energies, in part. One investor told TechCrunch that the cost per transaction from an energy intensity standpoint has only gotten more intense.
Musk hinted that other cryptocurrencies are on the table. Those will likely be ones that use “Proof of Stake” consensus mechanisms, which networks like Ethereum have committed to transition to due to their energy efficiencies.