Finance Finance News Bitcoin plunges after Elon Musk announces ban

Bitcoin plunges after Elon Musk announces ban

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A single tweet from Elon Musk has sent Bitcoin’s price tumbling as much as 17 per cent.

Mr Musk announced Tesla is suspending the use of bitcoin to purchase its vehicles, citing concerns about the use of fossil fuel for the cryptocurrency’s mining.

Bitcoin dropped from about $US54,819 ($A70,744) to $US45,700, its lowest since March 1, in just under two hours following the tweet shortly after 2200 GMT on Wednesday (0800 AEST on Thursday).

Mr Musk said Tesla would not sell any bitcoin and intends to use bitcoin for transactions as soon as mining transitions to more sustainable energy.

“We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction,” Mr Musk said.

Just a day earlier, Mr Musk 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 will accept dogecoin as payment to launch a lunar mission next year – just hours after he sent the crytocurrency spiralling downward when he called it a “a hustle” during a guest-host spot on TV show Saturday Night Live.

Mr Musk had previously said in March Tesla customers can buy its electric vehicles with bitcoin.

The use of bitcoin to buy Tesla’s electric vehicles had drawn attention to the contrast between Musk’s reputation as an environmentalist and the use of his popularity and stature as one of the world’s richest people to back cryptocurrencies.

The digital currency is generated when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that typically relies on electricity generated with fossil fuels, particularly coal.

At current rates, such bitcoin “mining” devours about the same amount of energy annually as the Netherlands did in 2019, the latest available data from the University of Cambridge and the International Energy Agency shows.

“We are of course very concerned about the level of carbon dioxide emissions generated from bitcoin mining,” Ben Dear, chief of Osmosis Investment Management, a sustainable investor managing around $US2.2 billion in assets that holds Tesla stock in several portfolios, said.

Mr Musk himself is a strong believer in digital currencies, but also advocates for clean technology.

“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Mr Musk said.

In theory, blockchain analysis firms say, it is possible to track the source of bitcoin, raising the possibility that a premium could be charged for green bitcoin.

Stronger climate change policies by governments around the world might also help.

Some bitcoin proponents note that the existing financial system – with its millions of employees and computers in air-conditioned offices – also uses large amounts of energy.

-with agencies