Bitcoin still struggling after Tesla U-turn

Bitcoin regained some of the losses sustained after Elon Musk said that Tesla would stop accepting the digital tokens as payment for its cars, and was trading at nearly $50,000 on Thursday.

The price of the world’s largest cryptocurrency dropped 17 per cent from around $54,819 to $45,700, its lowest since March 1, in just under two hours following Musk’s tweet on Wednesday.

Bitcoin later recovered about half of that drop and was trading at around $49,265 at 1119 GMT, while Ether, the second-largest cryptocurrency, which had dropped 14 per cent to a low of $3,550, rose above $4,000 before dipping back to around $3,700.

An announcement by Tesla on Feb. 8 that it had bought $1.5 billion of Bitcoin and that it would accept it as payment for its electric vehicles has been one factor behind the digital token’s surging price this year.

But Tesla Chief Executive Musk has faced pressure about the environmental impact of Bitcoin since the announcement.

“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,” Musk tweeted.

Musk’s comments roiled markets even though he said Tesla would not sell any Bitcoin and would resume accepting it as soon as “mining” for it transitioned to more sustainable energy.

The digital currency is still trading about 30 per cent higher than it was before Tesla’s announcement.

Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider, said broader selling of risk assets in traditional markets was another factor behind Wednesday’s Bitcoin plunge.

“I don’t think everything is selling off just because of this news. This was kind of the straw that broke the camel’s back in terms of adding to the risk sell-off,” Wang said. The S&P 500 dropped 2.1 per cent, and the Nasdaq Composite lost 2.7 per cent on Wednesday.