Bitcoin princes plunged on Wednesday after Elon Musk said Tesla will not accept the cryptocurrency any longer, in a measured pullback from the earlier pledge. Musk said his decision was based on the pressure bitcoin mining adds on fossil fuels. He said Tesla has suspended vehicle purchases using Bitcoin.
However, Musk said Tesla will accept other cryptocurrencies if they are less energy intensive. Musk added that he was worried about the 'rapidly increasing use of fossil fuels for Bitcoin mining and transactions.'
Bitcoin plunged as much as 15 percent in Asian trading on Thursday, going below $50,000, but it recouped some of its losses later on.
Tesla Not to Sell Bitcoin Holding
However, in a relief for bitcoin investors, Musk said he will not sell the bitcoin holding, a move that would have sent the currency spiraling down. The were outages at digital-token exchanges as investors rushed to offload bitcoin, Bloomberg reported.
Musk's u-turn on bitcoin came some two months after he gave a big fillip to the cryptocurrency. In February, Musk said Tesla had bought $1.5 billion worth of Bitcoin, adding that the carmaker would accept it as a payment.
Aggressive Dogecoin Campaign
In recent weeks, Musk has been aggressively talking about dogecoin, another cryptocurrency that has caught the imagination of investors.
He even suggested that Tesla might start accepting dogecoin as a mode of payment in future, which will be another blow to bitcoin. During the Saturday Night Live premiere of Dogefagther, he asked fans, "Do you want Tesla to accept Doge?"
Bitcoin and Greenhouse Gases
Bitcoin mining is highly energy intensive. The mining of cryptocurrencies involves the use of electricity and the process results in the release of massive amounts of greenhouse gases. Bitcoin mined through high-caliber computing, where computational math puzzles are solved used complex processors that consume massive amounts of energy.
Earlier in April, President Joe Biden's tax plans had hit bitcoin hard. The world's most popular and expensive cryptocurrency slumped below the $50,000 mark for the first time since early-March in fear of President Joe Biden's upcoming tax plans.
As per reports, the U.S government is looking to double taxes on capital gains to 39.6 percent, from the previous 19.8 percent for investors earning $1 million or more. Bitcoin slumped 10.3 percent to $48.266 as investors booked profits by pulling out of the cryptocurrency. The
slow economic recovery due to the pandemic is also a contributor to the dip in the market. Bitcoin faced a 15 percent loss this week but still remains up 65 percent since the start of 2021.
Stimulus Checks Boosted Bitcoin
However, some reports had said that the massive Covid-19 relief dollars the US administration has been pumping in the aftermath of the coronavirus pandemic was boosting bitcoin and other cryptocurrencies.
Almost half of the stimulus checks might have been reinvested in cryptocurrencies such as Bitcoin and stocks, further taking its price to new heights in the coming months, Japanese firm Mizuho Financial Group said in a study in March. Mizuho estimated that at the relief checks must have given at least a $40 billion boost to cryptocurrencies.