Tesla move jars Bitcoin confidence

Elon Musk has been a big cryptocurrency booster of late, even directing Tesla to buy $1.5 billion in Bitcoin for its corporate treasury earlier this year. On Thursday, he abruptly reversed course, tweeting that Tesla would stop accepting Bitcoin as payment for cars, citing environmental reasons.

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

Bitcoin’s price promptly plunged by more than 10% Thursday, the price closing below $50,000, and Tesla’s shares fell 3.1%.

Tesla said it would begin accepting the cryptocurrency a few months ago, when it also revealed a billion-dollar bitcoin buy, pushing the price up by more than 10%. Bitcoin seems remarkably sensitive to the billionaire’s tweets.

“If one person can dramatically alter spending power, the ‘stable store of value’ criteria of a currency is not met,” Paul Donovan of UBS wrote in a note to clients Thursday.

Mining bitcoin is energy-intensive, and the more it is worth, the more power it takes a network of computers to create the tokens, by design. Bitcoin’s climate problem is hardly a secret.

An entry-level Tesla is worth about one bitcoin, so the company’s $1.5 billion bitcoin purchase in February far surpasses the amount of the cryptocurrency it would collect from car sales for a very long time.

Musk’s statement said that “Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.”