The price of bitcoin hit a three-week high on Monday, climbing back above $40,000 after Elon Musk said that Tesla would resume allowing transactions made in the digital currency once crypto mining becomes greener.
The electric car company’s latest change of direction on its acceptance of bitcoin once again highlighted the continuing ability of Tesla’s billionaire chief executive to influence the price of bitcoin and other cryptocurrencies.
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing bitcoin transactions,” Musk said in a tweet on Sunday.
Electricity needed to mine bitcoin is more than used by 'entire countries'
The price of one bitcoin climbed to a high of $41,033 (£29,063) on Monday before slipping back to $40,580, still up more than 12% from its price before Musk’s tweet.
Musk, one of the most high-profile proponents of cryptocurrencies, also said that Tesla sold about 10% of its holdings to confirm bitcoin could be liquidated easily without moving the market.
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He announced in May that Tesla would no longer accept bitcoin for car purchases, citing long-brewing environmental concerns for a swift reversal in the company’s position on the cryptocurrency. In February, Tesla revealed it had bought $1.5bn of bitcoin and would accept it as a form of payment for cars. But the cryptocurrency’s production is at odds with the company’s mission toward a “zero-emission future”.
Bitcoin fell more than 10% after Musk’s tweet in May. He said that he believed cryptocurrency had a promising future but it could not be at great cost to the environment.
The energy used to produce bitcoin alone is equivalent to the annual carbon footprint of Argentina, according to the Cambridge Bitcoin Electricity Consumption Index, a tool from researchers at Cambridge University that measures the currency’s energy use.
Bitcoin mining – the process in which a bitcoin is awarded to a computer that solves a complex series of algorithms – is deeply energy-intensive. Because there is a finite number of bitcoins that can be mined – 21m – computers have to solve harder and harder algorithms in order to get bitcoin. The special equipment and intense processing power use a lot of electricity – as much as some entire countries.
The bitcoin price hit $40,000 after Elon Musk said Tesla will resume transactions once miners use more clean energy
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The concerns over energy use aside, cryptocurrencies have split opinion among investors and financial regulators for other reasons, including the rollercoaster ride sparked by their frequent swings in price.
Despite bitcoin’s recent rise, it is still trading about a third lower than the record high of $63,000, which it reached in April. A year ago, bitcoin’s value was under $9,500.
Earlier in June, the Central American country of El Salvador became the first in the world to adopt bitcoin as legal tender, as part of its technology-loving president’s proposals to use the cryptocurrency to promote “financial inclusion”, investment and economic development.
However, others remain unconvinced, and cryptocurrencies remain controversial. Global regulators are sceptical, on account of their volatility and vulnerability to theft or hacking.
The Bank of England has previously warned that the rise of digital currencies could set off a flood of withdrawals from high-street banks, risking financial stability and the wider economy, and cautioned that investors risk losing their money.
According to various measures, bitcoin is undervalued at current prices, said Alexandra Clark, a sales trader at the digital asset broker GlobalBlock, although she added: “Many analysts are still on the fence when it comes to determining whether the digital asset is ready to continue its uptrend.”
Tesla’s decision to sell 10% of its bitcoin holding “has brought about fresh accusations of pumping and dumping by Musk and reiterated the need for an investigation by the SEC [US Securities and Exchange Commission],” Clark said.
The US securities watchdog warned Tesla last year that Musk had twice violated a settlement requiring his tweets and material public communications to be preapproved by company lawyers, the Wall Street Journal reported at the start of June.