Shares of Tesla Declined Following Musk’s Announcement
Elon Musk made an announcement on his Twitter account that created pressure on bitcoin as well as his company. He tweeted a statement announcing that Tesla would no longer allow customers to pay for cars with bitcoin due to bitcoin’s impact on the environment. Shares of Tesla fell 1.3% in after-hours trading on Wednesday.
His latest announcement came just three months after Musk announced the firm invested $1.5 billion in bitcoin. Just after his tweet on May 12, the price of the world’s largest cryptocurrency fell by almost $8,000. Shares of companies that invested in bitcoin also declined following his announcement.
Despite Tesla’s decision to no longer accept bitcoin as a form of payment, the company has no intention to sell its bitcoin holdings. The electric carmaker is ready to use bitcoin again, as soon as mining transitions to more sustainable energy.
The majority of bitcoin is mined in Xinjiang, China, which is the major center for mining. Most of the electricity produced in Xinjiang comes from coal plants. The region has a fast-developing renewable sector, but the sector still accounted for less than a quarter of electricity generated in 2020. There are vast reserves of coal in the region. It won’t be easy to get rid of coal mines in a short period of time.
In the meantime, the company will look at other cryptocurrencies that are more eco-friendly.
Tesla, Elon Musk, and climate change
Tesla’s move could be an attempt to harmonize Musk’s ideals of carbon-free futurism with the realities of his business. Tesla needs a lot of lithium for its products. For instance, the battery of the Tesla Model S has about 12 kilograms of lithium in it. Demand for lithium is increasing exponentially, and it doubled in price in two years between 2016 and 2018.
Elon Musk has a history of tweeting to manipulate the stock prices of his company. Nevertheless, the announcement came as a surprise. It was no secret that the energy needed to mine bitcoin represented an environmental crisis. Bitcoin consumes more energy per year than Argentina, a nation of 45 million people. Most likely, Musk knew about issues created by cryptocurrency mining, before his company invested in bitcoin. His announcement could force bitcoin miners to consider renewable sources over cheap as well as dirty coal.
