Home Business NewsBusiness Musk crashes Bitcoin – where does this leave the cryptocurrency?

Musk crashes Bitcoin – where does this leave the cryptocurrency?

by LLB Editor
13th May 21 11:28 am

Tesla will no longer facilitate vehicle purchases using Bitcoin, Elon Musk has announced on Twitter.

Musk cited environmental concerns as the reason behind the decision, the Bitcoin price fell 10% overnight, and now trades around $51,000.

Where does this leave Bitcoin and Tesla?

Laith Khalaf, financial analyst, AJ Bell: “Tesla and Bitcoin were always odd bedfellows, given the environmental credentials of the electric car maker, and the colossal amount of energy consumed by the cryptocurrency. Musk hasn’t closed the door on Bitcoin entirely, and Tesla says it will return to using the cryptocurrency once it transitions to using more sustainable energy. Even if that happens, one could question whether that energy couldn’t be used more productively in the global economy, rather than solving a payments problem that for most people, simply doesn’t exist.

“Bitcoin backers will be wondering where this leaves the future of the cryptocurrency. Environmental matters are an incredibly sensitive subject right now, and Tesla’s move might serve as a wake-up call to businesses and consumers using Bitcoin, who hadn’t hitherto considered its carbon footprint. Tesla’s decision certainly puts pressure on other big companies who accept Bitcoin to review their practices, because boardrooms will now be wary about getting it in the ear from ESG investors on the shareholder register. This highlights that the long-term adoption of cryptocurrencies by businesses, consumers and investors is still highly uncertain, as Tesla itself has pointed out.

“Tesla investors might also be wondering where this leaves the electric car manufacturer. Musk says Tesla won’t be selling any of its Bitcoin, leaving the car maker with $1.3 billion of inert cryptocurrency on its balance sheet, which is subject to Bitcoin’s sporadic price movements, both positive and negative. The decision to suspend Bitcoin activity won’t materially affect Tesla’s main operations, after all, consumers can still pay for its cars in dollars, euros, pounds and yuan. However, it does raise question marks over its purchase of so much of the cryptocurrency less than six months ago. Tesla might have made $101 million from selling Bitcoin in the first three months of the year, but now investors will legitimately be asking whether that money could have been better spent elsewhere.”

 

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