What’s Going on With Tesla and Bitcoin?
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Since the release of its revolutionary Model S luxury sedan back in 2012, Tesla has forged a reputation for being a fearless pioneer, a futuristic brand which has taken bold steps in its production of self-driving and electric cars.
Despite this, Tesla’s announcement in February that it had purchased $1.5 billion of bitcoin, and would begin to accept it as payment, created shockwaves in the auto and cryptocurrency worlds.
Tesla has had an up and down relationship with bitcoin | Twenty20
Was bitcoin a good investment for Tesla?
Tesla was the biggest corporation to date to endorse this mysterious digital currency, and bitcoin’s price soared as a result. In fact, within three weeks of the announcement, Tesla had made roughly $1 billion in profits from the increase in bitcoin’s value.
In recent days, however, celebrity CEO Elon Musk’s love affair with bitcoin appears to be cooling, and the cryptocurrency’s value has tumbled back down.
So what is going on with Tesla and bitcoin? Do cryptocurrencies have a future in the automotive industry? Read on to find out.
What is bitcoin?
Bitcoin is the biggest and most famous player in the cryptocurrency market. This new type of currency operates outside of the global banking system with which you are accustomed.
Bitcoin uses peer-to-peer technology and is distributed across a digital record called a blockchain. In simple terms, this is a chain of digital units which keeps track of every single transaction. There is no centralized institute (like a bank) needed to facilitate payments.
Users access their bitcoin “wallet” using a private keycode. Cryptocurrencies can be used to buy goods and services all over the world, although most people who own bitcoin see it as an investment and do not use it for daily transactions.
Did anyone use bitcoin to buy a Tesla?
While Tesla has not said how many vehicles it sold for bitcoin, it is unlikely that many drivers took them up on the offer.
As reported by CoinDesk, the price of bitcoin is notably volatile, so Tesla would only grant a 30-minute window for buyers to complete a payment. Customers were warned they could overpay for their car if the value of bitcoin changed. In addition to this, Tesla’s “Bitcoin Payment Terms & Conditions” included the following warning:
“WE ARE NOT RESPONSIBLE FOR ANY FAILURE TO ACCURATELY INPUT THE ALPHANUMERIC CODE INTO THE RECIPIENT FIELD. IF YOU INPUT THE BITCOIN ADDRESS INCORRECTLY, YOUR BITCOIN MAY BE IRRETRIEVABLY LOST OR DESTROYED.”
Aside from a few cryptocurrency diehards who might enjoy the novelty, it is hard to see who would accept the inconvenience and risk of using bitcoin to buy a Tesla, especially as there was no financial incentive to do so.
What caused Tesla to change their mind about bitcoin?
As so few people were using bitcoin to buy their cars anyway, Tesla’s decision to stop accepting bitcoin has little basis in reality. So, what prompted the change of heart?
The official company line, as tweeted by Elon Musk last week, is that Tesla is suspending vehicle purchases using bitcoin due to climate change concerns:
“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.”
According to the BBC, the majority of new bitcoins are “mined” in China, using high-powered computers which consume huge amounts of electricity generated with fossil fuels.
Tesla has always positioned itself as an environmentally sustainable, and clean-energy focused company. As a result, Musk may have bowed to pressure from investors, many of whom take pride in Tesla’s green credentials.
What’s next for Tesla and bitcoin?
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In the week that followed Musk’s tweets that Tesla had suspended vehicle purchases using bitcoin, the price of a single coin dropped from approximately $57,000 to $43,000.
However, as reported by CNBC, Musk has since tweeted to clarify that Tesla will not sell any of its bitcoin, and that they intend to use it for transactions as soon as mining can shift to using a more sustainable energy source.
It is clear that Musk is still excited by cryptocurrency. He is publicly hoping that Tesla’s position will incentivize bitcoin miners to use more renewable energy, and enable his company to once again become a cheerleader for these kinds of emerging technologies.