- Bitcoin slid as much as 15% after Elon Musk said Tesla would stop taking payment in the token.
- It then pared its gains, but was trading more than 20% off the record high touched in April.
- Musk doubled down on his U-turn, calling bitcoin’s energy use “insane.”
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Bitcoin tumbled as much as 15% after Tesla boss Elon Musk said on Wednesday night that the car company would stop accepting payments in the cryptocurrency because of concerns about its environmental impact.
Musk later doubled down on his major U-turn, tweeting a chart showing bitcoin’s energy use and calling it “insane.”
The world’s most-traded cryptocurrency then pared some of its gains and was down 8.7% to $49,758 at 9.30 a.m. ET. Bitcoin remained around 70% higher for the year, but was 22% lower than a record high of close to $65,000 touched in April.
Musk’s announcement shocked the cryptocurrency world. The Tesla founder and chief executive has been one of the biggest advocates of cryptocurrencies, and has previously appeared to dismiss concerns about their energy use.
The revelation that Tesla had bought $1.5 billion of bitcoin and would start accepting payment in the token sent the price soaring 16% in a single day in February and added legitimacy to the asset class.
Yet Musk appeared to have had a change of heart, tweeting a statement on Wednesday night saying: “Tesla has suspended vehicle purchases using Bitcoin.
“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.”
Critics have long attacked bitcoin for its energy use. Bitcoin “mining” – the process of securing the network and creating coins using vast amounts of computing power – uses more energy each year than Sweden, according to Cambridge University researchers.
A Bank of America report estimated 73% of bitcoin mining takes place in China, where the majority of energy is generated by coal power.
Musk’s announcement sent other cryptocurrencies tumbling, too. Ether, the second-biggest coin by market size, was down 10.7% in the 24 hours to 9.30 a.m. ET. Dogecoin, XRP and Binance Coin all tumbled.
“Tesla accepting transactions bitcoin was viewed as a major step for the crypto market,” Daniel Ives, an analyst at Wedbush, said in a note.
“Now Tesla’s/Musk reversal will have a short-term negative impact on bitcoin and the crypto landscape as the market digests this confusing news from one of its biggest supporters.”