Bitcoin regained roughly half of its losses on Thursday, a day after falling 17 percent after Tesla CEO Elon Musk announced that his company (TSLA.O) would no longer allow digital tokens as payment for its vehicles.
At 1150 GMT, the price of the world’s largest cryptocurrency had risen up to about $49,808 per coin. In just under two hours after Musk’s tweet, it had fallen from about $54,819 to $45,700, its lowest since March 1.
Ether, the second-largest cryptocurrency, soared above $4,000 before falling down to about $3,750 after falling 14 percent to a low of $3,550.
Tesla’s announcement on February 8 that it had purchased $1.5 billion in bitcoin and would welcome it as payment for its electric cars was one of the factors behind the price increase this year.
However, Tesla CEO Elon Musk has faced criticism about the environmental implications of bitcoin since the announcement. The blockchain is based on computers competing to solve complex math problems, which consume massive quantities of energy.
“We are concerned about the increasingly growing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the highest emissions of any fuel,” Musk said in a tweet.
Musk’s remarks roiled markets despite the fact that he stated that Tesla would not sell bitcoin and would continue embracing it after “mining” for it transitioned to more renewable energy sources.
In a second tweet on Thursday, Musk slammed the “insane” amount of energy needed to generate bitcoin, sending the cryptocurrency lower for a brief moment.
The digital currency is now trading about 30% higher than it was prior to Tesla’s announcement in February.
According to Jeffrey Wang, the head of Americas at Amber Group, a cryptocurrency service provider headquartered in Vancouver, another factor behind Wednesday’s bitcoin dive was the widespread sale of risk assets in conventional markets.
“I don’t think anything is selling off because of this news; I think this was the straw that broke the camel’s back in terms of contributing to the risk sell-off,” Wang said.
On Wednesday, the S & P 500 (.SPX) fell 2.1 percent, while the Nasdaq Composite (.NDX) fell 2.7 percent.
Bitcoin has suffered after reaching a record high of $64,895.22 in mid-April, falling to the brink of $47,000 only 11 days later before lingering near $58,000 since the beginning of May.
Bitcoin mining consumes about the same amount of electricity annually as the Netherlands did in 2019, according to figures from the University of Cambridge and the International Energy Agency.
“Environmental issues are extremely sensitive right now, and Tesla’s move may serve as a wake-up call to companies and customers using Bitcoin who haven’t previously understood its carbon footprint,” said Laith Khalaf, an analyst at AJ Bell.
In pre-market trading, Tesla shares were down 1%. Coinbase, the largest cryptocurrency exchange in the United States, was down 5%. (COIN.O). The news has less of an effect on smaller cryptocurrencies.
“Interestingly, altcoins are doing well,” said Justin d’Anethan, sales manager at Diginex, a digital asset firm headquartered in Hong Kong.
“The explanation provided in the tweet is the use of fossil fuels for Bitcoin mining, but most cryptocurrencies have already discovered more effective ways to do so and therefore outperformed.”
Bitcoin’s market capitalization as a percentage of all cryptocurrency market capitalization fell to 42 percent, the lowest since June 2018.
“The topic (of massive energy usage by bitcoin miners) has long been recognized, so it’s nothing new,” said Makoto Sakuma, a researcher at the NLI Research Institute in Tokyo. “However, taken together with Musk’s recent comments about dogecoin, his current comments seem to indicate his enthusiasm for cryptocurrencies might be fading.”
Dogecoin lost more than a third of its value on Sunday after Elon Musk, whose tweets fueled appetite for the token earlier this year, referred to it as a “hustle” on the “Saturday Night Live” comedy broadcast.
However, by Tuesday, he was asking his Twitter followers if they wanted Tesla to consider dogecoin.