On Wednesday, Tesla CEO Elon Musk announced that the company would no longer accept bitcoin as payment for its vehicles.
In a social media post, Musk explains his decision not to accept cryptocurrency, citing the harmful impact that it has on the environment. “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” Musk wrote.
Bitcoin’s Environmental Impact
The Tesla CEO explains that bitcoin uses coal which is known for having the most harmful fuel emissions. To drive his point, Musk shared a post from the University of Cambridge Centre for Alternative Finance. Based on the chart, the CEO describes the energy levels needed to operate bitcoin as “insane.”
However, Musk is not permanently closing his door on bitcoin. “Cryptocurrency is a good idea on so many levels, and we believe it has a promising future,” the CEO said. However, Tesla wants to wait until the cryptocurrency becomes more sustainable.
Musk made his decision just three months after the company announced that it accepts bitcoin for vehicle purchases. In fact, Tesla bought $1.5 billion worth of cryptocurrency to give the company liquidity. The move also drove an increase in the value of bitcoin.
Today, the CEO’s decision still holds a lot of influence in the market movement for cryptocurrency. His announcement immediately caused a sharp decline in bitcoin as prices dropped from $54,700 to $46,000 or around 12 percent. Just hours after the news came in, the cryptocurrency market stood from $2.43 trillion to $2.06 trillion, losing around $365.85 billion.
It’s Virtual, So Why Is It Harmful?
Generally, bitcoin is mined and produced virtually. However, unlike most financial currencies, it is not handled by a single entity. Rather, it depends on a complex network of miners who solve mathematical problems which allow bitcoin transactions.
With this, the cryptocurrency relies on high-powered computers to operate and track its digital assets. Its energy consumption is so large that it can use enough energy to run a country like the Netherlands.
Overall, the cryptocurrency produces more than 20 million tons of carbon emissions each year, the same amount of emissions produced by countries such as Jordan and Sri Lanka.
Currently, countries like Canada and Siberia have launched projects to provide cleaner sources of energy for bitcoin such as windmills, and hydropower.