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.

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.

crypto markets

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.

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.

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.

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.

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.