Tesla made a big investment in Bitcoin in earlier this year after, perhaps ironically, its CEO Elon Musk pumped Dogecoin to a notable high with a series of tweets before later tanking that during his appearance on Saturday Night Live. And we do mean big: $1.5 billion. Nor was the crypto investment a symbolic gesture, since the carmaker said it also would accept Bitcoin as payment. Bitcoin values soared on the news.
But like most things that go up, Tesla’s Bitcoin strategy has come crashing down. Elon Musk announced Tesla would no longer accept Bitcoin for its vehicle sales, though the company appears to be hanging onto what Bitcoin it has left over after some currency sell-offs that padded the automaker’s balance sheet in the first quarter of this year. Bitcoin values depressed double-digit percentages on the news.
Well, That Seemed Quick… But What’s Bitcoin?
Bitcoin is the most prominent of a number of virtual currencies out there, and like Tesla itself, it has had a bit of a rollercoaster ride since its debut. In 2017, it hit a high of roughly $19,000, then tumbled the following year to the mid-$3,000s. Starting late last year, the currency (along with the stock market as a whole) has gained serious traction. Values were hovering in the $11,000 range as recently as October. Early in 2021, it hit an all-time high.
As the most prominent EV-maker around, Tesla has always had some green credibility along with its high-tech image. The Bitcoin move burnishes the latter, but has implications for the former that are troubling. Bitcoin “mining” is highly energy-intensive, and because energy is taken from the grid, that usage generally creates a carbon footprint—especially mining that occurs in China, which powers much of its grid with coal. By some estimates, the total carbon footprint of global Bitcoin mining rivals that of small nations or large cities. Elon Musk, and Tesla’s, promotion and acceptance of the currency—which has already had a sizable impact in value—could certainly lead to more mining activities, and a larger carbon impact. Which is why the automaker—well, specifically Mr. Musk—announced Tesla would no longer accept Bitcoin in exchange for its vehicles.
What, if anything, the automaker plans on doing with the Bitcoin it currently holds is an open question, though as we mentioned, Tesla has used sell-offs of the currency to bolster its bottom line. So don’t figure on those coins going anywhere. In yet another tweet, Elon Musk says “To be clear, I strongly believe in crypto, but it can’t drive a massive increase in fossil fuel use, especially coal. “
As for how you’ll need to pay for a Tesla? Looks like the U.S. dollar is your friend once again, though Musk already seems to be setting the internet on fire by toying with the notion of allowing Teslas to be bought using Dogecoin…