Elon Musk can shake things up, with just a tweet. You must have seen the recent doge-mania his tweets have created in the crypto space. On May 12, he had a change of heart when he tweeted about Tesla suspending vehicle purchases using the Bitcoin.
Musk, one of bitcoin’s most ardent backers, tweeted a graph of bitcoin’s power consumption and said: “Energy usage trend over past few months is insane.”
That followed his tweet from Wednesday saying Tesla would no longer accept the cryptocurrency as payment for its electric cars because it came at a great cost to the environment, an about face from his stance in March.The price of the world’s largest cryptocurrency dropped from around $54,819 to $45,700, its lowest since March 1, in just under two hours following the tweet shortly after 2200 GMT. It recovered about half of that drop early in the Asian session, and last traded about $50,196.
Ether, the world’s second-largest cryptocurrency, followed a similar pattern, also dropping 14% to touch a low of $3,550, before bouncing back to about $3,965. “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,” Musk wrote.
Tesla’s shares were up 1%. Message volume related to the stock on trading-focused social media site Stocktwits spiked by a third, but sentiment on the stock weakened by 7%, data showed.“Tesla and Bitcoin were always odd bedfellows, given the environmental credentials of the electric car maker, and the colossal amount of energy consumed by the cryptocurrency,” Laith Khalaf, financial analyst at fund platform AJ Bell said.
Tesla’s announcements earlier this year that it had bought $1.5 billion of bitcoin and that it would accept it as payment for cars has been one factor behind the digital tokens’ surging price this year. As a result, Musk’s comments roiled markets even though he said Tesla would not sell any bitcoin and would resume accepting bitcoin as soon as mining transitioned to more sustainable energy.
“The issue (of huge energy use by bitcoin miners) has been long known so it’s nothing new. But taken together with Musk’s recent comments about dogecoin, his latest comments seems to suggest his passion for cryptocurrencies may be waning,” said Makoto Sakuma, researcher at NLI Research Institute in Tokyo.
A broader selling of risk assets in traditional markets was another factor in the plunge, said Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider. “I don’t think everything is selling off just because of this news. This was kind of the straw that broke the camel’s back in terms of adding to the risk sell-off,” he said.
On Wednesday, the S&P 500 dropped 2.1%, and the Nasdaq Composite lost 2.7%. Smaller cryptocurrencies were less affected by the news.“Interestingly enough, altcoins are performing well. The reason given in the tweet is fossil fuel use for the mining of BTC, but most cryptocurrencies have already found more efficient ways to do that and therefore outperformed,” said Justin d’Anethan, sales manager at Hong Kong-based head of exchange sales at Diginex, a digital asset company.
The bitcoin dominance index, a ratio of bitcoin’s market cap to the total market cap of all cryptocurrencies dropped further to 42, its lowest level since June 2018. A figure of 100 would indicate all cryptocurrency holdings were bitcoin.
