Tesla’s U-turn raises questions about Bitcoin

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%, and Tesla’s shares dropped more than 4%, but recovered when trading began Thursday.

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.

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.”

We’ll see whether it made any recent trades when it reports second-quarter results in July.

Given the impact that Musk’s tweet had on Bitcoin’s price, any action just before or after will be scrutinized.

Musk can be an unreliable narrator. On Tuesday, he asked his followers on Twitter if Tesla should accept Dogecoin, the jokey cryptocurrency. (Most said yes.) On Sunday, he announced that SpaceX had taken Dogecoin as payment for shuttling a satellite to the moon. And as host of “Saturday Night Live,” he said that cryptocurrency was both “the future of currency” and “a hustle.”