- Tesla has bought and sold a lot of the cryptocurrency bitcoin, and was also taking it in payment for EVs but suddenly stopped earlier this month.
- CEO Elon Musk’s cited reason was that mining bitcoin is too hard on the environment; he said Tesla would not accept it for EV purchases until the production of the coin becomes more environmentally friendly.
- Musk claimed he wouldn’t be selling off the company’s own bitcoin, and it’s likely at least some form of cryptocurrency will be accepted again to buy a Tesla eventually. Meanwhile, there are dealerships around the country that are accepting bitcoin now for other brands.
Like most activity in the modern stock market, Elon Musk’s sudden reversal to stop accepting bitcoin as payment for Tesla has little basis in reality—except for speculators in cryptocurrencies and Tesla stock.
It was a short-term bet that paid off handsomely for Tesla: buy $1.5 billion worth of bitcoin at the close of 2020 when it sold for under $20,000; sell off 10 percent of it during the first quarter of 2021 as bitcoin neared $50,000; reap a $101 million profit. That profit accounted for almost a quarter of Tesla’s $438 million net income that quarter. At the end of March, either before or after the sale, Tesla began accepting bitcoin on its website for crypto customers who could fire off a digital deposit or an entire car’s worth of coin. Then, on May 12, Tesla yanked it.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Musk said that day in a formalized statement on Twitter. “Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.”
Bitcoin’s price, which had crested to nearly $60,000 in the days before Musk’s tweet, was already dropping heavily all day before it sank below $48,000 in the hours that followed. Thousands of people and bot accounts replied to Musk, as they usually do, but this time offering lesser-known cryptocurrencies hoping that a tweet from Musk—an endorsement, by any measure—would send their bank accounts soaring.
“Working with Doge devs to improve system transaction efficiency. Potentially promising,” Musk tweeted the next day. That was days after he was on Saturday Night Live on May 8 and said, “Yeah, it’s a hustle” when asked about dogecoin, the joke that turned into serious cryptocurrency after Musk popularized it with tweets in April. As expected, his comments on the TV show sent dogecoin on a downward slope—more than 35 percent, according to Coindesk. Lo and behold, after Musk’s tweet on May 13, it’s going back up. Tesla’s stock also dipped sharply to below $600—one of the lowest dips of this year—and already in after-hours trading this weekend, it’s trending upward.
Tesla’s experiment with bitcoin didn’t help customers, who were warned they could overpay for their cars if the currency’s exchange rate changed and that Tesla couldn’t pay them back if it did, that hackers could steal currency, that bitcoins could be “lost or destroyed,” and that if they entered the wrong wallet code, the bitcoin might go anywhere other than Tesla. Not problems that ever happen to people using real currency.
Although you won’t be able to buy a Tesla (for now) using bitcoin, there are dealers around the country that have already started to accept the cryptocurrency. Two examples, located by Reuters and CNBC, are the Houston luxury-car dealership Post Oak—which displays a shiny bitcoin on its homepage—and the Alabama and Georgia Kia dealer Carriage Auto Group. Post Oak’s owner told CNBC earlier this year that the dealership has already sold 17 cars using bitcoin. Carriage will take it only if buyers can pay the entire cost of the vehicle purchase with the currency.
So as long as you realize it’s still an unregulated, complex marketplace, and arguably still a bit shady, it’s still possible to purchase a vehicle in some places using bitcoin. As for Tesla, it’s to be expected that cryptocurrency will become a medium of exchange there again sooner or later.
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