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Musk decries bitcoin's 'insane' energy use after Tesla payment U-turn

Thursday, May 13th 2021, 3:02 pm - The Tesla magnate announced Wednesday that his electric vehicle company will no longer accept the cryptocurrency as payment.

(Reuters) - Tesla Inc boss Elon Musk on Thursday denounced the "insane" amount of energy used to produce bitcoin, doubling down on his sudden rejection of the cryptocurrency as a means of payment over environmental concerns.

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.

Bitcoin, which sank 17% to its lowest since March 1 on Wednesday after Musk's comments, climbed back to $50,360 on Thursday. Other cryptocurrencies including ether also fell before regaining some ground. Coinbase, the biggest U.S. cryptocurrency exchange, was down 2%.

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.

Some Tesla investors and environmental campaigners have been increasingly critical about the way bitcoin is created or "mined" - high-powered computers compete to solve complex mathematical puzzles in an energy-intensive process that often relies on fossil fuels, particularly coal.

Musk said he backed that concern, especially the use of "coal, which has the worst emissions of any fuel."

If bitcoin was a country, it would use about the same amount of electricity a year as Switzerland does, Deutsche Bank analysts said.

REUTERS Bitcoin energy use graphic (Reuters)

"In a post COVID-19 world, as the focus of companies shifts back to climate concerns, bitcoin's poor environmental credentials ... will make companies and governments unwilling to use it," said Jeff Schumacher, CEO of NAX that helps businesses launch asset-based securities.

A big proponent of Musk's bitcoin adoption has been ARK Invest's Cathie Wood, who has argued in favor of Tesla's disruptive vision and invested in Tesla through its flagship ARK Innovation ETF.

Woods' bet on Tesla and companies like Coinbase gives Ark more indirect exposure to cryptocurrencies.

Tesla revealed in February it had bought $1.5 billion of bitcoin, turbo-charging the crypto market. In April, the firm said it trimmed its position by 10% in the first quarter, booking a net profit of about $100 million.

Musk said on Wednesday that Tesla would retain its bitcoin holdings with the plan to use the cryptocurrency as soon as mining transitions to more sustainable energy sources.

WATCH BELOW: EMISSIONS ARE ABOUT TO SPIKE POST-PANDEMIC WITH A COAL RESURGENCE

'CARBON-FREE'

Some welcomed Musk's U-turn on bitcoin payments.

"We were surprised it took Musk so long to recognize the detrimental impact of Bitcoin on the environment but are happy to see the reversal of Tesla's position," said Ben Dear, CEO of Osmosis Investment Management, which holds Tesla stock.

He said the reversal will "put pressure companies moving forward to think twice about the consequences before accepting it as a form of payment," adding the volatility of bitcoin makes it commercially nonviable for large scale corporate adoption.

Ex-Bank of England Governor Mark Carney the decision, saying: "As with transportation, we need a new payments system that is resilient, high performance and carbon free."

Meltem Demirors, chief strategy officer at digital asset manager CoinShares Group, said Tesla was unlikely to have sold many, if any, cars using bitcoin and the back flip generated positive publicity while simplifying payment processes.

"Elon was getting a lot of questions and criticisms and this statement allows him to appease critics while still keeping bitcoin on his balance sheet," Demirors said.

Musk did not say in his Twitter comments whether any vehicles had been purchased with bitcoin and Tesla did not immediately respond to a request for comment.

He reaffirmed he remained a strong believer in cryptocurrencies and was looking at other cryptocurrencies that use less than 1% of bitcoin's energy.

On Tuesday, he had polled Twitter users on whether Tesla should accept dogecoin, a currency he has helped turn from a joke into a valuable commodity.

He announced on Sunday that his commercial rocket company SpaceX would accept dogecoin as payment to launch a lunar mission next year - just hours after he sent the cryptocurrency spiraling downward when he called it "a hustle" during a guest-host spot on the "Saturday Night Live" TV show.

(Reporting by Hyunjoo Jin in Berkeley, Subrat Patnaik in Bengaluru; Additional reporting by Sruthi Shankar, Aaron Saldanha, Ankur Banerjee and Kanishka Singh in Bengaluru, Anna Irrera and Tom Wilson in London, Megan Davies in New York, Kevin Buckland in Tokyo; Editing by Pravin Char, Sayantani Ghosh and Saumyadeb Chakrabarty)

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