Bitcoin, Tesla Stocks Fall After Musk Rejects Use of Cryptocurrency To Buy Cars

The strategic inconsistency of selling electric cars because of their environmental benefits but purchased with cryptocurrencies whose 'mining' - or manufacture - uses vast amounts of largely coal-fired electricity has finally caught up with Tesla. 

That shares of both Tesla and cryptocurrencies plunged following the announcement attests to Musk's celebrity and the faddish nature of the crypto phenomenon. JL

Jeremy Owens reports in MarketWatch:

Tesla will halt sales of cars using bitcoin due to the effects on the environment that cryptocurrency mining has, Chief Executive Elon Musk said, and prices of Tesla shares and the cryptocurrency dropped immediately after. “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.” The majority of bitcoin is mined in China, with Xinjiang a major center for mining that is also fueled largely by coal. Tesla purchased $1.5 billion worth of the cryptocurrency in early February.

Tesla Inc. will halt sales of cars using bitcoin due to the effects on the environment that cryptocurrency mining can have, Chief Executive Elon Musk said Wednesday, and prices of Tesla shares and the cryptocurrency dropped immediately after.

“Tesla has suspended vehicle purchases using bitcoin,” Musk posted on Twitter. “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.”

“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” he continued.

Musk did say that Tesla would not sell any of the bitcoin owned by Tesla currently, and would use it again “as soon as mining transitions to more sustainable energy.” In the meantime, he said Tesla will look at other cyrptocurrencies that use less energy to mine.

Bitcoin prices BTCUSD, 4.50% fell as much as 14%, according to Coindesk data. As of 11:30 p.m. Eastern, bitcoin was down 8.3% at roughly 50,000, off from about $54,700 before the tweet. Tesla shares TSLA, 2.63% declined 1.3% in after-hours trading.

Tesla purchased $1.5 billion worth of the cryptocurrency in early February, after Musk signaled his interest in bitcoin on his Twitter account. Soon after, Tesla officially told the SEC that Musk had a new title of “Technoking” and Chief Financial Officer Zach Kirkhorn would henceforth be known as Tesla’s “Master of Coin.”

When Tesla reported first-quarter earnings last month, executives revealed that Tesla had sold about 10% of its bitcoin holdings for a profit of more than $100 million. Musk and Kirkhorn said the sale was just a test of the market’s liquidity and said they did not plan to sell more.

The University of Cambridge’s Centre for Alternative Finance reported not long after the Tesla purchase that the news had caused a severe spike in the amount of electricity used to mine bitcoin. While it is an estimate, the group at the time estimated that bitcoin was using as much energy an on annualized basis as countries like Argentina and the Netherlands, about 121.9 terawatt hours.

As of Wednesday afternoon, that estimate had grown to 147.8 terawatt hours, similar to the annual energy usage of Malaysia or Sweden, according to the Centre for Alternative Finance.

The majority of bitcoin is mined in China, with Xinjiang a major center for mining that is also fueled largely by coal, according to previous reports.