© Reuters. FILE PHOTO: A representation of the virtual currency Bitcoin can be seen in this illustration from January 8, 2021 in front of a stock graph. REUTERS / Dado Ruvic
By Kevin Buckland, Alun John, and Elizabeth Howcroft
(Reuters) -Bitcoin has regained some of the losses it suffered after Elon Musk said Tesla (NASDAQ 🙂 would no longer accept the digital tokens as payment for its cars, trading at nearly $ 50,000 on Thursday.
The price of the world’s largest cryptocurrency fell 17% from around $ 54,819 to $ 45,700, its lowest level since March 1, in just under two hours after Musk’s tweet on Wednesday.
Later on, about half of that decline rebounded, trading at around $ 49,265 around 1119 GMT, while Ether, the second largest cryptocurrency, which had fallen 14% to a low of $ 3,550, surged above $ 4,000 before hitting around $ 3,700 fell back.
An announcement by Tesla on February 8 that it had bought $ 1.5 billion worth of Bitcoin and was accepting it as payment for its electric vehicles was a factor in the price of the digital token soaring that year.
However, since the announcement, Tesla boss Musk has come under pressure over Bitcoin’s environmental impact.
“We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk tweeted.
Musk’s comments puzzled the markets despite saying Tesla would not sell and accept bitcoin again once the “mining” shifted to more sustainable energy for it.
The digital currency is still trading 30% higher than it was before Tesla’s announcement.
Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency services company, said wider sales of risk-weighted assets in traditional markets was another contributing factor to Bitcoin slump on Wednesday.
“I don’t think anything sells just because of this news. This was a kind of straw that broke the camel’s back to increase risk selling,” said Wang.
Those fell 2.1% and the lost 2.7% on Wednesday. ()
Bitcoin has struggled since hitting a record $ 64,895.22 in mid-April and fell to $ 47,000 just 11 days later, before reaching $ 58,000 since early May.
At current rates, Bitcoin mining consumes about the same amount of energy annually as the Netherlands did in 2019, data from Cambridge University and the International Energy Agency showed.
“Environmental issues are an incredibly sensitive issue right now, and Tesla’s move could serve as a wake-up call for businesses and consumers using Bitcoin that had previously ignored its carbon footprint,” said Laith Khalaf, an analyst at AJ Bell.
Tesla shares fell 1% in pre-market trading. The largest U.S. cryptocurrency exchange, Coinbase, was down 5%. Smaller cryptocurrencies were less affected by the news.
“Interestingly, altcoins are doing well,” said Justin d’Anethan, director of sales at Diginex, a digital asset company, chief of exchange sales in Hong Kong.
“The reason given in the tweet is to use fossil fuels to mine BTC, but most cryptocurrencies have already found more efficient ways to do it and therefore outperformed.”
The Bitcoin Dominance Index, a ratio of Bitcoin’s share of the total market capitalization of all cryptocurrencies, fell to 42%, its lowest level since June 2018.
Makoto Sakuma, a researcher at the NLI Research Institute in Tokyo, said, “The problem (of the enormous energy consumption by Bitcoin miners) has been known for a long time, so it’s nothing new, but along with Musk’s recent comments on Dogecoin, his most recent comments seem to lay down suggests that his passion for cryptocurrencies is waning. “
Cryptocurrency dogecoin lost more than a third of its price on Sunday after Musk, whose tweets drove demand for the token earlier this year, referred to it as a “hustle” on the Saturday Night Live comedy show.
On Tuesday, he asked his followers on Twitter if Tesla should accept Dogecoin.