In brief
- On Wednesday, Elon Musk announced Tesla has stopped taking Bitcoin payments over concerns about the cryptocurrency's impact on the environment.
- Today, the managing director of equity research firm Wedbush Securities described the reversal as "a shocker."
In a new note, Dan Ives, managing director at equity research firm Wedbush Securities, describes Tesla’s "U turn" on Bitcoin as a "shocker."
Tesla CEO Elon Musk tweeted on Wednesday that Tesla will no longer accept Bitcoin due to concerns over the cryptocurrency’s adverse impact on the environment.
“Tesla has suspended vehicle purchases using Bitcoin," Musk said. "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." The Tesla CEO also added that Tesla will not be selling any more of its Bitcoin, and the company intends to use it for transactions as soon as the network transitions to more sustainable energy.
It was only three months ago (almost to the day) on Feb. 8 that Tesla announced it had invested $1.5 billion in Bitcoin and would accept Bitcoin as a form of payment for its products.
Now, Musk has "made a major U-turn on the crypto issue... in a head scratching move," Ives write. "Musk is now concerned about the use of fossil fuels in Bitcoin mining and transactions, yet the nature of Bitcoin mining has not changed in the last three months, which speaks to why backtracking on the crypto transaction three months later is a very surprising and confusing move to both Tesla and crypto investors."
Tesla's reversal "will have a short-term negative impact on Bitcoin and the crypto landscape as the market digests this confusing news from one of its biggest supporters," Ives added.
Other crypto onlookers are equally as confused as Ives.
Neeraj Agrawal, communications director at the nonprofit Coin Center, told Decrypt he “can’t understand where Musk is coming from," since Musk surely "knew about the energy use and the arguments that mining can be a useful force on the grid. We don’t know we don’t know what changed."
What does this U-turn mean for Tesla and Bitcoin?
Ives added that the change of tune on Bitcoin doesn’t change the “thesis or growth trajectory for the electric vehicle story.”
However, Ives added, it does add to the noise and volatility surrounding Tesla “at a time in which risk assets are under enormous selling pressure on the Street with Tesla leading the charge.”
In the last 24 hours, Bitcoin has fallen by 11% from about $56,000 to as low as $47,000. Currently, the price is teetering on the $50,000 bracket.
Tesla shares on the other hand ($TSLA), are on the up, albeit it by a small margin of 2% on the day to a price of approximately $602.