On Wednesday, Elon Musk, CEO of American electric vehicle maker Tesla, announced in a tweet that the company will stop accepting Bitcoin as a payment. Remarkably, this decision comes after the company acknowledged several environmental concerns related to the cryptocurrency’s operational and storage system.
“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 wrote on Twitter.
Besides, the CEO added that cryptocurrency is a “good idea on many levels.” However, its promise cannot come at a “great cost to the environment.”
In fact, Tesla won’t be selling any of the Bitcoin it owns, Musk said. Thus, the price of Bitcoin fell about 5% to $51,847 after the CEO’s comments on Twitter. Finally, Tesla’s stock finished Wednesday down 4.4%.
Tesla’s change in attitude towards the cryptocurrency
Despite the recent environmental concerns, Tesla said in February that it had invested around $1.5 billion in Bitcoin. Moreover, the Company announced it soon planned to begin accepting the digital currency as payment for vehicles.
As a result, the market value of Tesla’s Bitcoin holdings as of March 31 was nearly $2.5 billion. Moreover, the company’s profits hit $438 million in the first three months of the year, Tesla’s best-ever earnings for a single quarter.
However, early a quarter of those profits, or $101 million, came from selling a portion of the company’s stake in bitcoin.
Wedbush Securities analyst Dan Ives told CBS that; “Tesla accepting transactions through Bitcoin was viewed as a major step for the crypto market.”
However, with Tesla’s/Musk reversal, this will have a short-term negative impact on the cryptocurrency and the crypto landscape.
The environmentally negative traits of Bitcoin
In fact, a 2019 study by researchers at the Technical University of Munich and the Massachusetts Institute of Technology concluded that; in late 2018, the entire Bitcoin network was responsible for up to 22.9 million tons of CO2 per year.
Thus, the researchers found out that these emissions were similar in quantity to a large Western city. Also, to an entire developing country like Sri Lanka.
To provide a comparative framework, total global emissions of greenhouse gas from the burning of fossil fuels; were about 37 billion tons last year.
This situation comes from the fact that bitcoin relies on computers, which rely on electricity, to exist. Thus, the number of computers and the energy needed to power them is rising.
Moreover, the growing value of Bitcoin is directly tied to the amount of energy it uses.