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Representations of virtual currency Bitcoin are seen in front of Tesla logo. (REUTERS)
Representations of virtual currency Bitcoin are seen in front of Tesla logo. (REUTERS)

Bust after boom? Elon Musk’s bitcoin concerns sink crypto-linked stocks

  • Bitcoin plunged as much as 15% after Elon Musk announced Tesla won't accept it as a form of payment for its electric vehicles.

Stocks across the globe that were linked to cryptocurrencies fell in line with the slump in Bitcoin, after Tesla Inc. Chief Executive Officer Elon Musk expressed concerns over its energy usage.

Bitcoin plunged as much as 15%, sinking to as low as $46,045 after Musk said he was worried over the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions," and suspended Tesla purchases with the asset, indicating he might favor other cryptocurrencies with much lower energy usage.

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The knock-on effects spread to stocks worldwide that are linked to Bitcoin. Coinbase Global Inc., the operator of the largest U.S. cryptocurrency exchange, fell 4.8% in U.S. post-market trading. Microstrategy Inc, which has put billions of dollars of its assets into Bitcoin, plunged 9.2% after market, while Jack Dorsey’s Square Inc. also dropped.

In Asia, Monex Group Inc., whose ownership of crypto exchange Coincheck Inc. had made it the second-best performing stock in Japan in 2021, dropped as much as 12%. Nexon Co., which just last month became the first Japanese firm to make a significant bet with a $100 million purchase of the cryptocurrency, slumped as much as 17%, the most in a year, though a poor growth outlook given at its earnings was also weighing on sentiment.

Musk said in his post that Tesla wouldn’t be selling any Bitcoin and aimed to use it for transactions once mining shifted to a more sustainable energy. “We believe it has a promising future," Musk wrote, “but this cannot come at great cost to the environment."

That puts him at odds with ARK Investment Management LLC’s Cathie Wood, who last month shared research that she said would “debunk the myth that Bitcoin mining" is bad for the environment. Wood’s Ark Innovation ETF, which has been having a miserable month and has Coinbase as its ninth-largest holding, was little impacted by Musk’s post, falling 0.2% in post-market trading.

Musk’s move is a step in the wrong direction for Bitcoin bulls as well as for stock investors betting on the digital currency. Tesla’s disclosure in February that it had purchased $1.5 billion in Bitcoin and would accept it as a payment, added legitimacy to the cryptocurrency. It was the most visible catalyst during this year’s rally in the digital currency.

  • First Published Date : 13 May 2021, 09:06 AM IST