Stocks exposed to cryptocurrencies slumped globally after Elon Musk voiced concerns over Bitcoin’s energy usage, delivering a blow to the digital money’s standing within global markets just a few months after the Tesla Inc. boss became one of its biggest supporters.
Crypto shares from the U.S. to Asia slid as Bitcoin plunged as much as 15%, sinking to as low as $46,045 before trimming the decline.
The drop came as 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.
Digital asset technology company Marathon Digital Holdings Inc. fell 7.2% when the U.S. market opened, as did peer Riot Blockchain Inc., while Microstrategy Inc., which has put billions of dollars of its assets into Bitcoin, tumbled as much as 5.7% Thursday.
Coinbase Global Inc., the operator of the largest U.S. cryptocurrency exchange, erased a 3% drop to turn positive ahead of an earnings report due Thursday evening.
A “shocker from Musk,” Wedbush Securities analyst Daniel Ives wrote in a note to clients.
“The nature of Bitcoin mining has not changed in the last three months, which speaks to why backtracking on the crypto transaction three months later is a very surprising and confusing move to both Tesla and crypto investors.”
Tesla announced in February that it had invested $1.5 billion in Bitcoin and signaled an intent to begin accepting the cryptocurrency as a form of payment.
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 11%. 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 14%, the most since August 2019, though a poor growth outlook given at its earnings also weighed on sentiment.
In Europe, crypto-miner Argo Blockchain Plc slid as much as 16%, blockchain technology firm On-Line Blockchain Plc lost 15% and crypto infrastructure group Northern Data AG dropped as much as 17% before trimming losses.
Tesla’s own shares rebounded to rise as much as 2.8% in early trading after having already slumped about 30% since the company announced the Bitcoin investment in February.
After last year’s huge rally, the stock has suffered from lofty trader expectations despite posting a record quarterly profit last month. It’s also been among the stocks hit by this week’s selling in tech equities, with concerns around rising inflation fueling fears of higher interest rates.
“Not accepting Bitcoin does not change the thesis or growth trajectory for the electric vehicle story, however it does add to the noise and volatility around the name at a time in which risk assets are under enormous selling pressure,” added Wedbush’s Ives.
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,” he wrote, “but this cannot come at great cost to the environment.”
That puts Musk 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, rose 2.2% after closing at the lowest level since November on Wednesday.