The crypto ecosystem received spectacular attention earlier this year, when Tesla motors began accepting Bitcoins in payment. The announcement meant a massive win for the crypto space, and it legitimized Bitcoin’s transactional value and utility, beyond just speculation.
Well, today, Tesla announced they are withdrawing said decision, for the time being, until further notice…
Elon Musk explained that his company would no longer accept Bitcoin due to the excessive consumption of fossil fuels in Bitcoin mining.
Tesla Goes Against Bitcoin
This tweet aligns Tesla behind sound environmental concerns on Bitcoin’s mining. Criticism on the digital asset and its proof-of-work (POW) mining system is growing. POW means powerful computing hardware dedicated to mining, exacerbating electrical consumption.
Last year’s bull market stage raised Bitcoin’s price to the moon, and consequently gave miners the opportunity to expand their operations. This rapid growth of crypto adoption that led to the birth of mining pools took electrical consumption to annual levels above that of small nations.
University of Cambridge’s Bitcoin Electricity Consumption Index is responsible for the latest publications on Bitcoin mining consumption. The team at UC has concluded that crypto mining around the world account for approximately 147 terawatts, roughly 0.5% of global electrical consumption.
Of course the magnitude of the blow means a bear market phase may set in. Following Elon Musk’s announcement, Bitcoin prices immediately plummeted 10%, dropping down to $51,000. The major crypto token price crashed 10% within two hours.
There’s a detail that should be noticed by investors however, Tesla has not sold its Bitcoin holdings.
In February this year, Tesla purchased $1.5 billion worth of Bitcoin. And soon after Elon Musk’s famous tweet announcing that Tesla would begin accepting Bitcoin. These two related events acted as triggers to Bitcoin’s price appreciation past $60,000.
So now Tesla no longer accepts Bitcoin for vehicle purchases, yet Musk made clear that his company will still hold the Bitcoin on its balance sheet, until the crypto players find more environmentally friendly alternatives.
More precisely, Musk revealed that they are looking at other cryptocurrencies based on alternative consensus algorithms that require <1% of Bitcoin’s energy/transaction.