Tesla’s Bitcoin enthusiasm was short-lived as the leading electric car manufacturer suspended the Bitcoin payment option within a month of announcement. Elon Musk, the CEO of the company cited Bitcoin’s rising environmental concern as the key reason behind scraping BTC payment for Tesla cars. However, many pointed that Musk’s claims on Bitcoin don’t add up since Tesla is still holding onto over $1 billion in BTC on its balance sheet.
Many theories started to flood the market, right from the investor pressure, to the US government’s pressure to Tesla trying to make a way in the Chinese market. Given China’s recent crackdown on crypto businesses and Bitcoin mining, many said Tesla was toying with the line of the Communist Party to keep its growing business afloat.
The economic prosperity that China has achieved is truly amazing, especially in infrastructure! I encourage people to visit and see for themselves.
— Elon Musk (@elonmusk) July 1, 2021
However, recent developments from the world’s most populous state indicate all might not be good for the electric car maker.
Tesla’s Honeymoon Phase in China Over?
China has become the biggest consumer market in the world and several American renowned brands are trying to establish a market there to ensure new consumer and cash flow. Tesla is no different, the EV manufacturer is building one of the largest manufacturing plants in the country and started delivering this year with over 30k China-made cars in June.
A slew of developments suggests the honeymoon period for Tesla in China might be coming to an end. Over the past couple of months, things have started to go against the EV maker which seemed to do no wrong in China for quite some time. Several regulatory issues have cropped up with the Chinese media giving the company a lot of bad press.
“Tesla in China seems to be having one problem after another.”
The honeymoon Elon Musk once enjoyed in the world’s most populous nation is over. Can Tesla recover from all the bad press in China? @MattCampbell reports https://t.co/TRDxrxY777 (Video via @Quicktake) pic.twitter.com/V7ykYatYTt
— Bloomberg (@business) July 7, 2021
A recent report from Bloomberg suggested that Tesla has requested the Communist Party to censor critical comments against the company on social media, but didn’t get any help. If Tesla’s Chinese business takes a hit it could also possibly impact its Bitcoin holdings.
Will Tesla Sell its Bitcoin (BTC)?
Tesla sold 10% of its $1.5 billion bitcoin purchase last quarter, and Musk at the time said it was done to test Bitcoin’s liquidity. The BTC sale also helped the EV maker to extend its profit for the first quarter of 2021. The company still holds a significant portion of Bitcoin on its balance sheet and as Bitcoin price continues to trade lower than its buying price, added with the Chinese factor, chances are Tesla might be compelled to sell a part of their Bitcoin holdings again.
Musk had continued his attack on Bitcoin reigniting many long-disputed FUDs. The most recent being the scalability debate where he called BTC and ETH slow.
BTC & ETH are pursuing a multilayer transaction system, but base layer transaction rate is slow & transaction cost is high.
There is merit imo to Doge maximizing base layer transaction rate & minimizing transaction cost with exchanges acting as the de facto secondary layer.
— Elon Musk (@elonmusk) July 9, 2021
Musk at the time of discontinuing BTC payment for Tesla had said that they will reconsider once there is ample proof to suggest more than 50% of Bitcoin mining is green. The recent Bitcoin mining council report proved that nearly 57% of the BTC mining is done using renewable sources without any comment from Musk. This proved that Musk’s Bitcoin snub was more than just about the environment.