Bitcoin Plunges After Elon Musk Rules It Out For Tesla Purchases

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Bitcoin blow. Elon Musk says Tesla it has suspended use of Bitcoin by customers, due to its heavy use of fossil fuel during mining

The value of the world biggest digital currency Bitcoin has plunged this week after one of its well known champions made a shock announcement.

Tesla CEO Elon Musk said the electric car maker will no longer accept Bitcoin payments from customers, due to environmental concerns about its generation.

The value of Bitcoin fell almost 17 percent after the tweet to its lowest point since the beginning of March, the Guardian reported. It recovered slightly in Asian trading but was still down 12 percent at $50,933 early on Thursday morning.

Bitcoin (c) Alexander Kirch, Shutterstock 2014

Bitcoin champion

Elon Musk has been one of the most outspoken champions of bitcoin.

The value of Bitcoin began surging in February this year when Tesla in a filing with the US Securities and Exchange Commission (SEC) revealed that it had purchased $1.5bn (£1.1bn) worth of Bitcoin.

That prompted the price of the digital currency to jump to $43,765 per coin, and its value kept increasing in the following weeks.

Another boost came in late March, when Elon Musk confirmed Telsa vehicles in the United States could be purchased by Bitcoin.

In mid April the value of Bitcoin surged again and reached a record high of $63,000 (£45,800).

However it is now valued at $50,933 early on Thursday morning, after falling in response to Elon Musk’s announcement.

Fossil fuel

In a tweet, Musk said that Tesla had suspended purchases using Bitcoin because of environmental concerns.

“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worse emissions of any fuel” he tweeted.

It should be remembered that Bitcoin mining uses large amounts of energy, much of it derived from the burning of fossil fuel.

Essentially this is because Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles, a process known as mining. This is mostly done in China, and is an an energy-sapping activity that currently often relies on electricity generated with fossil fuels, particularly coal.

At current rates, Bitcoin mining uses about the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency has reportedly shown.

Musk said Tesla would not sell any bitcoin, and intends to use bitcoin 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,” Musk tweeted.

Regulatory reluctance

Regulators and central banks around the world have typically not been overly keen on digital currencies.

Last month the Bank of England and HM Treasury revealed that the Chancellor, Rishi Sunak had asked them to look at the case for a new “Britcoin”, or central bank-backed digital currency.

That is a big change considering that seven years ago in 2014, the Bank of England warned that Bitcoin could pose a threat to financial stability in the UK – should it see widespread adoption.

And last week the Governor of the Bank of England (BOE), Andrew Bailey, had a very blunt warning for people investing in cryptocurrencies.

Bailey said cryptocurrencies “have no intrinsic value” and people should only buy cryptocurrencies if they are prepared to lose all their money.