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Summary
- Tesla CEO, Musk has said that bitcoin payments could contribute to greater consumption of fossil fuels.
- Tesla now intends to resume Bitcoin for transactions once as its mining gets transitioned to more sustainable energy options.
- The electric car maker’s announcement triggered a slide in the value of the bitcoin as well.
Tesla has said that it will no longer be taking bitcoins for payment of its cars purchase, citing environmental reasons. Elon Musk, CEO of Tesla, tweeted on Wednesday that these payments could lead to greater consumption of fossil fuels, especially coal, which has the highest emission rates. He raised his concern regarding the rising use of fossil fuels for Bitcoin mining and transactions. He stated that while cryptocurrency was a great idea at many levels, but certainly not at the cost of the environment.
Musk also said that his company now intends to resume Bitcoin for transactions once its mining gets transitioned to more sustainable energy options. Though bitcoin has gained tremendous popularity in recent years, it is still mainly used as an investment product instead of a form of payment.
The electric car maker’s announcement has triggered a slide in the value of the digital currency. The company’s shares (NASDAQ:TSLA) moved down 4.4 per cent to US$ 589.89 at the day’ close on Wednesday and was down by around 2 per cent in the Pre-market session to USD 578.91 today.
Copyright © 2021 Kalkine Media
Also Read: After SpaceX, Will Tesla (TSLA) Start Accepting Payment In Dogecoin?
Environmental reasons
Bitcoins rely on computers, which use electricity. Therefore, the consumption of energy required for using them is on a rapid rise. In fact, the increasing value of Bitcoin is directly linked to the amount of electricity they need.
A 2018 report by the Technical University of Munich and the Massachusetts Institute of Technology had said that the working of a complete Bitcoin network led to 22.9 million tons of carbon dioxide emissions every year.
Also Read: Dogecoin nosedives on Musk’s remarks; what does it mean for the cyptocurrency?
Bitcoin’s value drops
The cryptocurrency slid 17 per cent within two hours after the announcement on Wednesday, dropping below a value of US$ 50,000. In fact, it hit a value of US$ 45,700, which was its lowest since 1 March this year.
Tesla had bought a stash of bitcoin worth US$ 1.5 billion in February, which it has decided not to sell any more. A part of that currency was sold during Q1 2021 that helped the firm pump up its profits. As per the securities filings, the market value of Tesla's Bitcoin holdings was US$ 2.48 billion at the end of March.
Also Read: Tesla Shares Drop Despite Record Earnings For Q1’21
Musk’s U-turn
The electric vehicle maker had begun accepting bitcoin payments towards the end of March this year. That surprise move had helped strengthen the legitimacy of Bitcoin and boosted its market value.
However, with the latest U-turn of Elon Musk, it is not clear why Tesla did not consider the environmental angle before as these facts were well-known even at that time.
The company said that it is now searching for other options that may use less than one per cent of Bitcoin's energy for each transaction.
Earlier, to purchase a vehicle from Tesla using bitcoins, a buyer had to transfer the cryptocurrency from his digital wallets to another entity that converted it into, say pounds and sends the sum to the electric car maker.
