Bitcoin plunges after Musk announces ban

Tesla will no longer accept bitcoin for car purchases, chief executive Elon Musk says, citing long-brewing environmental concerns for a swift reversal in the company’s position on the cryptocurrency.

Bitcoin fell as much as 17 per cent after Musk tweeted his decision to suspend its use, less than two months after Tesla began accepting the world’s biggest digital currency for payment.

The use of bitcoin to buy Tesla’s electric vehicles had highlighted a dichotomy 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.

Some Tesla investors, along with environmentalists, have been increasingly critical about the way bitcoin is “mined” using vast amounts of electricity generated with fossil fuels.

Musk said on Wednesday he backed that concern, especially the use of “coal, which has the worst emissions of any fuel”.

“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,” he tweeted. Tesla shares fell 1.25 per cent after hours.

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).

It recovered about half of that drop early in the Asian session, and last traded about $US50,196.

Other cryptocurrencies, including ethereum, also fell before regaining some ground in Asia trade.

Tesla revealed in February it had bought $US1.5 billion of bitcoin, before accepting it as payment for cars in March, driving a roughly 20 per cent surge in the cryptocurrency.

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

Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often 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.

Musk reiterated he remained a strong believer in cryptocurrencies.

“We are also looking at other cryptocurrencies that use <1% of bitcoin’s energy/transaction,” he tweeted on Wednesday.

Just a day earlier, 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.

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