Bitcoin prices dropped over $360 billion after Elon Musk’s announced Tesla would stop accepting cryptocurrency as a method of payment.
The announcement comes only three months after the electric car retailer enabled the purchasing of vehicles with Bitcoin, driving around a 20 per cent surge in the cryptocurrency.
Elon Musk has cited the environmental issues surrounding the mining of Bitcoin as the reason for the company’s decision, saying that he believes cryptocurrency is a “good idea” however it “cannot come at a great cost to the environment”.
Blocks (new sets of transactions) are added to the Bitcoin blockchain every 10 minutes by miners, making the network an incredibly environmentally damaging as the coin requires large amounts of processing power to create new blocks.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
The popular cryptocurrency has a carbon footprint the equivalent of Singapore, producing 55.03 megatons of CO2 annually according to Digiconomist’s Bitcoin Energy Consumption Index.
Tesla shares fell 1.25% after hours of Musk announcing the discontinuation of the currency as means of payment.
However the company said it would retain the Bitcoin it previously purchased in February and plan to use it as soon as mining operations become more sustainable.
“The environmental impact from mining bitcoins was one of the biggest risks for the entire crypto market,” a senior market analyst told Edward Moya told Reuters.
A chief strategy officer at CoinShares Group, Meltem Demirors, said Tesla was quite unlikely to have sold many, if any, of the electric cars using Bitcoin.
“Energy use in itself is not bad, sending and storing emails uses energy. Yet, we don’t infer email to be bad because it consumes energy,” Demirors, told CNBC.
“What we have here is people trying to decide what is or is not a good use of energy, and bitcoin is incredibly transparent in its energy use while other industries are much more opaque.”