Bitcoin plunged as much as 17% in under two hours after Tesla CEO Elon Musk tweeted that Tesla suspended vehicle purchases using the cryptocurrency.
The price of Bitcoin cryptocurrency dropped from around $54,819 to $45,700, its lowest since March 1, in just under two hours after the tweet.
“We’re concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” Musk wrote. Tesla won’t sell any Bitcoin and will use it for transactions when “mining transitions to more sustainable energy”, he added.
Along with Bitcoin, Ether followed a similar pattern, also dropping 14% to touch a low of $3,550, before bouncing back to about $3,965.
The development came as a shock to Tesla observers, given that the car company only recently disclosed it had put $1.5 billion worth of Bitcoin on its books and would begin accepting it for payment. That purchase, disclosed in a regulatory filing in February, has already yielded a “positive impact” of at least $100 million for Tesla, the company said last month.
According to Makoto Sakuma, a researcher at NLI Research Institute in Tokyo, “The issue (of huge energy use by bitcoin miners) has been long known so it’s nothing new. But taken together with Musk’s recent comments about dogecoin, his latest comments seems to suggest his passion for cryptocurrencies may be waning.”
A broader selling of risk assets in traditional markets was another factor in the plunge, said Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider.
“I don’t think everything is selling off just because of this news. This was kind of the straw that broke the camel’s back in terms of adding to the risk sell-off,” he said.
Though, smaller cryptocurrencies were less affected by the news.
“Interestingly enough, altcoins are performing well. The reason given in the tweet is fossil fuel use for the mining of BTC, but most cryptocurrencies have already found more efficient ways to do that and therefore outperformed,” said Justin d’Anethan, sales manager at Hong Kong-based head of exchange sales at Diginex, a digital asset company.