Bitcoin, the world’s most popular digital currency dropped nearly 17% to its lowest level after the tweet, by Tesla CEO Elon Musk. Since Musk’s tweet, the cryptocurrency sector has lost about $290 billion in value. Through the Coin Metrics info, bitcoin was down 10.6% at around $48,500, its first time below $50,000 since April 24, 2021.
According to a statement issued by Musk, the company has stopped taking bitcoin as payment for its cars due to concerns that it would lead to increased use of fossil fuels used to mine the currency. The tweet came shortly after the electric car giant started accepted bitcoins for the payment of its cars. Elon maintained the position that mining bitcoin is too harmful to the atmosphere and that the company will not allow it for EV sales until the coin’s processing becomes more environmentally sustainable.
According to the reports, China is responsible for more than 75% of global Bitcoin mining. The carbon footprint of bitcoin is equivalent to one of China’s ten largest towns. The reason for this is because most Bitcoin miners use electricity generated from fossil fuels, mainly coal, for the majority of the year, changing only during the rainy summer months to green energy, primarily through hydropower.
Cryptocurrency is a good idea… but we are concerned about the rapid increase in the use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel, Mr. Musk wrote. He also mentioned that the electric carmaker will not sell any of its Bitcoin and that it plans to use it for purchases until mining switches to more environmentally friendly energy sources.
Tesla made a short-term gamble that paid off handsomely through purchasing $1.5 billion in bitcoin at the end of 2020 when it was under $20,000, sold 10% of it in the first quarter of 2021 when bitcoin approached $50,000 and profited for $101 million. The benefit accounted for nearly a quarter of Tesla’s net income in the quarter, which was $438 million.
Tesla’s $1.5 billion bitcoin inventory, which Musk bought earlier this year, will no longer be sold, according to the CEO. In addition, according to a recent JPMorgan survey, institutional investors seem to be turning away from bitcoin and back to gold based on future contracts. Bitcoin is often mentioned as a possible substitute for gold as a medium of exchange but only time will tell if both can be used as substitutes for each other.