Elon Musk reversed his backing of bitcoin on Wednesday as he announced that Tesla was suspending plans to accept payment for its cars in the cryptocurrency. He put the change of heart down to environmental concerns about the mechanism used to validate bitcoin transactions, pointing to a wider rethink of the digital currency that could throw into question its growing appeal among other companies. Bitcoin was down 9 per cent to $49,769 on Thursday. It had fallen to $46,045 following the announcement, the lowest level since March 1.
Musk has faced sharp rebukes over Tesla’s support for bitcoin, including from ESG investors who prioritise environmental, social and governance issues. The Tesla chief executive’s enthusiasm for the energy-hungry currency ran counter to the climate change concerns that he has always said led to his involvement in electric cars. The bitcoin price jumped 15 per cent in a single day in February after Tesla revealed it had put $1.5bn of its corporate cash into the digital currency and planned to one day accept it in payment for its cars. The news was widely seen as an important validation of bitcoin in the corporate world and sparked a debate among corporate treasurers about using the currency. In a brief statement released on Twitter on Wednesday, Musk said: “We are concerned about [the] rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” Bitcoin uses a “proof of work” mechanism, relying on so-called miners who employ large-scale clusters of computers to crunch puzzles using a consensus algorithm. Musk’s statement concluded by saying Tesla was “looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction” — a comment that could provide a shot in the arm to digital currencies that use other less power-hungry ways to validate transactions.