Crypto prices plummet as Elon Musk’s Tesla suspends Bitcoin payments due to coal-powered mining
Tesla CEO Elon Musk's Tesla has announced that it will cease accepting Bitcoin payments due to concerns about energy consumption.
Tesla, on the other hand, stated that it will not sell any of its Bitcoin assets and is instead looking for alternative cryptos that consume less than 1% of Bitcoin's energy.
Tesla's rather surprising move comes less than two months after the automaker began accepting Bitcoin for the purchase of its electric vehicles.
Is this truly a matter of energy pollution?
Tesla claims that it has suspended Bitcoin payments due to concerns about the negative environmental impact of Bitcoin mining powered by coal. However, this is not always the case.
Bitcoin mining is the process by which new Bitcoins are created. It is carried out with the assistance of highly sophisticated computers capable of resolving extremely complex computational mathematics problems.
However, the majority of energy used for Bitcoin mining activities worldwide is generated by coal-fired power plants. Indeed, some researchers believe that several states are luring crypto miners in order to maintain the operation of their coal plants.
According to a study, Bitcoin mining consumes the same amount of energy as the Netherlands and has a carbon footprint comparable to that of Singapore.
Tesla, an energy-conscious company, may have been aware of this prior to purchasing up to $1.5 billion worth of Bitcoin in February. Tesla, as an electric vehicle manufacturer, is a proponent of sustainable energy adoption. Why the sudden U-turn?
Michael Saylor, CEO of Microstrategy Ironic argues that because Bitcoin transactions consume no incremental energy, the net effect on fossil fuel consumption over time will be negative, all other factors being equal.
Additionally, Anthony Pompliano Elon, founder of Morgan Creek Capital and a fervent Bitcoin supporter, claims that “75% of miners use renewable energy.”
If this is the case, Tesla's energy concerns will not appear to be sufficiently valid to external observers. The automaker most certainly does not want the price of Bitcoin to plummet as a result of its investment in the crypto asset class. Thus, its explanation for suspending Bitcoin payments appears to be a strategy for mitigating the price impact of the announcement. However, this has not been the case.
Bitcoin Price Falls by 16%
The world's largest cryptocurrency saw a roughly 16% price drop on Thursday following Tesla's announcement, with several investors suffering significant losses.
Bitcoin's price fell from $54,800 to $46,294, its lowest level in three weeks, according to CoinDesk. However, the flagship cryptocurrency's price steadily recovered to around $48,500 within a few hours.
At the time of this writing, Bitcoin is trading at $50,852.
Other cryptocurrencies took significant hits as well, including Ethereum, which fell nearly 10%, Dogecoin, which fell 15%, Litecoin, which fell 14%, and the much-hyped 'Doge killer,' Shiba coin, which fell a whopping 33% in the last 24 hours.
In conclusion, Elon Musk is well-known for his market-moving influence in the cryptocurrency space. Any comments or actions taken by the world's second-richest man or his company, Tesla, have an effect on the prices of cryptocurrency offerings such as Bitcoin and dogecoin, a meme currency.
On balance, Tesla's decision to suspend Bitcoin payments has eroded investor confidence and harmed the cryptocurrency's chances of becoming fully mainstream.
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