On 24 March, Tesla announced that it would accept payments in Bitcoin, leading to a huge rise in the price of the cryptocurrency behemoth, but Elon Musk announced in a tweet on Thursday 13 May that he was finally backtracking. Payment in Bitcoin at Tesla will therefore have lasted barely two months, but the electric car manufacturer is not expected to part with its stock of Bitcoins for the time being.
Tesla and Bitcoin to merge in early 2021
After numerous tweets from Tesla's whimsical CEO, Elon Musk, on the subject of Bitcoin, the brand officially began its rapprochement with Bitcoin at the beginning of the year, starting with a $1.5 billion purchase of Bitcoins. This sum represented no less than 8% of its cash reserves, which stood at $19 billion at the time! This investment was interpreted by everyone as proof of absolute confidence in Bitcoin, and the news did not fail to significantly boost the price of the most famous cryptocurrency.
But Elon Musk didn't stop there, announcing on 24 March that not only were bitcoin purchases now accepted at Tesla, but that the bitcoins received from sales would not be converted into dollars! Tesla was thus embarking on large-scale bitcoin storage, proving its faith in the future of cryptocurrencies!
However, less than two months after this announcement, which upset the crypto-community and crypto-sceptics, Elon Musk is finally backtracking.
Tesla abandoning Bitcoin?
This Thursday 13 May 2021, Elon Musk announced, against all odds, that Tesla would finally no longer be accepting Bitcoin payments. Ecological concerns are said to explain this about-turn. Bitcoin mining is particularly energy-intensive, and energy consumption is only increasing as the project develops.
This argument is rather logical for a brand of electric car committed to the environmental cause. However, it may seem a little odd that Elon Musk is only now taking this into account, since the very high energy consumption of Bitcoin is no secret to anyone. This about-face after only two months of active collaboration is leading some to suspect that he orchestrated this rapprochement, and then this separation, solely for his own personal benefit. However, as Tesla's CEO is known for his quirky personality, it's actually quite difficult to say!
"Tesla has suspended vehicle purchases using bitcoin. We are concerned about the rapid increase in the use of fossil fuels for Bitcoin mining and transactions, particularly coal, which has the worst emissions of any fuel.
Crypto-currencies are a good idea in many ways and we think they have a bright future, but it can't be at the expense of the environment.
Tesla will not sell bitcoin and we intend to use it for transactions as soon as mining switches to more sustainable energy. We are also looking at other crypto-currencies that use <1% of the energy/transaction of Bitcoin."
So Elon Musk isn't saying goodbye to Bitcoin altogether, but Tesla wants to prioritise cleaner projects that are more in line with its green policy. We can therefore assume that the brand will turn to cryptocurrencies that use the "Proof of Stake" (PoS) protocol, which uses 99% less energy than the "Proof of Work" (PoW) protocol used by Bitcoin.
The impact of this abandonment on the Bitcoin price
As usual, Elon Musk's announcement had a serious impact on the Bitcoin price. Whereas Bitcoin was trading at around €45,000 the day before yesterday, Elon Musk's tweet sent it plummeting to €39,000! It is currently trading at €41,429.83. Bitcoin fell by almost 10% following this announcement!
This is not the first time that Elon Musk has had an impact on the Bitcoin price. Back in January, a simple #bitcoin on his Twitter account boosted the price by $8,000! The announcement that it would be possible to buy his Tesla in bitcoins caused the price to rise by 3%. The Securities and Exchange Commission, nicknamed the "American stock market watchdog", warned him about future tweets in view of Tesla's capital in bitcoins. Any new tweet about Bitcoin could now be seen as an attempt to manipulate its price!
But Bitcoin is not the only crypto to appear regularly on Elon Musk's twitter feed. In fact, the Tesla CEO is an ardent defender of cryptocurrencies.
Tesla says no to Bitcoin, but yes to other cryptos!
Although Tesla is turning its back on Bitcoin for the time being, Elon Musk has no intention of stopping there with the cryptocurrency! The CEO is actively considering an alternative to resume cryptocurrency payments at Tesla. And the crypto-community's predictions are going well!
Dogecoin is currently leading the betting. Elon Musk tweets very regularly about Dogecoin, so it wouldn't be surprising if this crypto were to replace Bitcoin at Tesla. He regularly conducts polls on his Twitter page to encourage the adoption of Dogecoin, and recently announced that he was working with the project's developers to improve its transaction system. This closer relationship suggests a future collaboration. However, Dogecoin does not have its own network. This cryptocurrency is hosted on the Litecoin network. What's more, it also uses Proof of Work as its mining protocol, which is precisely what Tesla criticised Bitcoin for doing. Despite all this, Dogecoin uses 150 times less energy.
These drawbacks have led some to suggest that Tesla may finally turn to other projects. Ripple could be chosen, although it also uses proof of work, since it is much more energy-efficient than Bitcoin. Alternatively, Tesla could turn to projects using Proof of Stake (PoS). Among those being considered are :
Cardano
Solano
Stellar
Algorand, etc.
Tesla actually has a vast choice! So we'll see who the electric car giant turns to for its cryptocurrency payments. Given the personality of its CEO, another U-turn wouldn't be surprising!
