Where next for Bitcoin after Musk's Tesla stops crypto payments

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Where next for Bitcoin after Musk's Tesla stops crypto payments

Environmental matters are an incredibly sensitive subject right now, and Tesla's move might serve as a wake-up call to businesses and consumers using Bitcoin, who had not already considered its carbon footprint, argues AJ Bell industry expert Laith Khalaf.

Elon Musk's tweet announced Tesla will no longer facilitate vehicle purchases using Bitcoin citing environmental concerns as the reason behind the decision which led to the crypocurrency's 10% price fall overnight, trading just shy of $50,000 at 10am on 13 May.

In early reaction, Khalaf, financial analyst at AJ Bell said: "Tesla and Bitcoin were always odd bedfellows, given the environmental credentials of the electric car maker, and the colossal amount of energy consumed by the cryptocurrency.

The long-term adoption of cryptocurrencies by businesses, consumers and investors is still highly uncertain, as Tesla itself has pointed out.”

"Musk hasn't closed the door on Bitcoin entirely, and Tesla says it will return to using the cryptocurrency once it transitions to using more sustainable energy. Even if that happens, one could question whether that energy couldn't be used more productively in the global economy, rather than solving a payments problem that for most people, simply doesn't exist."

He said Bitcoin backers will be wondering where this leaves the future of the cryptocurrency: "Tesla's decision certainly puts pressure on other big companies who accept Bitcoin to review their practices, because boardrooms will now be wary about getting it in the ear from ESG investors on the shareholder register. This highlights that the long-term adoption of cryptocurrencies by businesses, consumers and investors is still highly uncertain, as Tesla itself has pointed out."

Khalaf also pointed out Tesla investors might also be wondering where this leaves the electric car manufacturer: "Musk says Tesla won't be selling any of its Bitcoin, leaving the car maker with $1.3bn of inert cryptocurrency on its balance sheet, which is subject to Bitcoin's sporadic price movements, both positive and negative."

The decision to suspend Bitcoin activity won't materially affect Tesla's main operations as consumers can still pay for its cars in dollars, euros, pounds and yuan, he added.

"However, it does raise question marks over its purchase of so much of the cryptocurrency less than six months ago. Tesla might have made $101 million from selling Bitcoin in the first three months of the year, but now investors will legitimately be asking whether that money could have been better spent elsewhere."