The meaning of Elon Musk’s bitcoin U-turn for Crypto future

The relationship between Tesla and cryptocurrencies has been changeable. The electric vehicle manufacturer announced in February that it bought US$1.5 billion worth of bitcoin. The company also announced that it planned to accept cryptocurrency in the future for purchases. From that day, the price surged from US$39,000 to US$47,000. The price continued to surge in April that was its all-time high of US$66,000.

Shortly after, the situation has changed dramatically. In late April published the news that Tesla had decided to sell around 10% of its bitcoin holdings, which demonstrated the liquidity of the digital currency.

Most importantly, Musk recently announced that Tesla had suspended purchases using bitcoin because of concerns about the increasing use of fossil fuels that are used in mining cryptocurrency. This event has prompted considerable sales in the crypto markets. It changed the price of bitcoin from around US$55,000 to US$45,000.

The concerns about the carbon footprint of bitcoin are pretty new. Miners secure the network by using various supercomputers to compete in complex number-guessing games, which use a massive amount of electricity. What`s worse is that mining relies primarily on coal-fired power in China. However, many critics contend that the impact is far more moderate in the crypto industry than suggested.

In any case, it is hard to believe that Musk was not aware of these issues from the beginning. And the fact that Tesla still keeps bitcoin on its balance makes the announcement more confusing. It seems paradoxical with Musk’s concerns on carbon emissions because the falling price of bitcoin might damage Tesla’s investment.

Does the bull run end?

Cryptocurrency investors` concern is whether the falling in price affects the end of the bitcoin bull run. It has seen the price rise since the end of 2020. However, in the crypto market since Musk’s announcement, prices have already tanked.

Crypto investors can console themselves that Tesla is not selling its bitcoin holdings. At least for now, crypto exchanges will not have to process large sell orders from the world’s biggest car company.

One other thing that deserves to be noted in Musk’s statement is that Tesla could still accept payments in crypto with no more than 1% of bitcoin’s energy.

Bitcoin is currently just outside the world’s top ten currencies in terms of its total aggregate market value. Above all of these things, bitcoin has several big selling points.