Crypto markets plunge after Elon Musk's Tesla rejects Bitcoin

Crypto markets have plunged across the board this morning after Elon Musk tweeted that Tesla Motors would stop accepting Bitcoin based on environmental concerns, less than two months after it started using it.

Bitcoin began dropping immediately after Musk’s 8.06am AEST tweet, reaching under US$46,000 on Binance just after 10am. BTC had been trading at US$54,500 earlier.

Tesla & Bitcoin pic.twitter.com/YSswJmVZhP

— Elon Musk (@elonmusk) May 12, 2021

By 10.30am AEST, BTC had clawed back to just over $US49,000 ($63,350), down 13.3 per cent from 24 hours earlier. Only 15 of the top 100 cryptocurrencies were in the green.

Nano, the No. 80 crypto, had experienced some extreme volatility — jumping from $US8.20 to nearly US$14 in the hour after Musk’s tweet, then dropping back down to US$8.25, and then pumping back up to over $US13.

Cryptocurrency Prices by Coinlib

Traders may have been speculating on what eco-friendly cryptocurrency Tesla would accept in place of Bitcoin — although other “green” cryptos that consume much less power than Bitcoin, like Cardano, Tezos, XRP, Iota and Algorand, were down, not up.

$NANO is the answer.

— Felipe Cirilo (@FelipeCirilo) May 13, 2021

Dogecoin, Musk’s favourite crypto, plunged from US46c to as low as US35c, although by 11.20am AEST it had recovered to US42.7c

Questions for Musk

Musk announced March 24 that Tesla would accept Bitcoin for payments, sending the price of the original cryptocurrency from around $US54,000 to over $US57,000 at the time.

The energy consumption of Bitcoin was well known at the time, leading to some scepticism about Musk’s motives.

I refuse to believe that the CEO of a company worth $500 billion didn’t know about the energy consumption of bitcoin before purchasing it and opening it up for transactions

— Dr. Parik Patel, BA, CFA, ACCA Esq. 💸 (@ParikPatelCFA) May 13, 2021

According to the Bitcoin Energy Consumption Index, Bitcoin has an annualised energy consumption of 115.26 terrawatt hours – about the same as the Netherlands. (Australia consumed around 190 TWh last fiscal year, according to the Australian Energy Regulator, with the entire world using 22,315 TWh in 2018, according to the International Energy Agency.

Bitcoiners contend this issue is over-emphasized and that the original cryptocurrency’s energy consumption should be compared against the legacy financial system they are trying to replace.

Elon … you realize that 75% of miners use renewable energy, right?

This energy story has been debunked over and over again.

— Pomp 🌪 (@APompliano) May 12, 2021

But backers of a number of next-generation altcoins that use far less power than Bitcoin say this is indeed a legitimate issue the crypto community needs to solve.