On Wednesday, Elon Musk was back at his market-destabilizing best as hundreds of millions were wiped from the value of various cryptocurrencies. The sharp drop came as Tesla announced it would stop accepting Bitcoin as payment for cars in light of the astronomical power consumption used to mine the coin.
Musk’s Tweet was sent at 6:06 p.m. ET Wednesday, and tracking graphs for Bitcoin saw a sharp drop immediately after, rallying a bit overnight Wednesday and then falling again early Thursday. CNBC says that as much as $365 billion was lost from the cryptocurrency market following the Tweet.
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The damage wasn't contained to Bitcoin. Ethereum and Ripple lost value, with Ethereum down $318 or 7.88% while the Ripple lost a similar 7.13%, taking its value down by $0.10 to $1.29. Even the Shiba Inu coin took a beating, down 36% although that may have been unrelated to Musk's tweet.
As of today (May 14), things have improved slightly. At its lowest point, Bitcoin was worth roughly $49,000 in the wake of Tesla's announcement. Its peak in the last month was around $63,000, and it's now clawed back to $51,230 as of this writing.
Dogecoin also lost value, a trend that started after Musk called it a "hustle" on Saturday Night Live. However the news that it will soon be listed on crypto exchange Coinbase caused it to quickly gain value. It's now at $0.55, up from $0.45 after SNL and a low of $0.38 on Thursday.
A statement published on Elon Musk’s Twitter feed, in a gloriously inaccessible image form, read as follows:
"Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially 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.
Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin's energy/transaction".
Musk later followed up with a graph showing the energy use of Bitcoin, which he described as "insane."
Energy usage trend over past few months is insane https://t.co/E6o9s87trw pic.twitter.com/bmv9wotwKeMay 13, 2021
According to researchers at Cambridge University, Bitcoin uses more electricity than Argentina. Bitcoin mining is computationally very challenging, which means mining requires a lot of intense processing which in turn uses a lot of electricity. Researchers say bitcoin uses 121.36 terawatt hours per year. By comparison, Dogecoin currently uses 0.12 KWh per transaction compared to Bitcoin's 707 KWh according to TRG Datacentres.
The replies to Musk's May 12 Tweet are numerous and many are blaming Musk for ruining their investments. There are people who have money in Bitcoin who have seen the value of it drop enormously. Many casual investors won't have the ability or patience to wait for their investment to recover.
This is a cold, hard reminder that cryptocurrency is a serious investment and while there's a lot of fun to be had while the price rises, loses can be large — at least in the short term — and potentially devastating for small investors. As always, unless you're a professional investor, treat any crypto purchase seriously and don't risk more than you can afford to lose.