In March 2021, Tesla CEO Elon Musk had announced on Twitter that the carmaker would accept the most popular and largest cryptocurrency, Bitcoin as a mode of payment to purchase electric vehicles. The option to make payments using Bitcoin was only possible in the United States at the time; however, Elon Musk had announced that Tesla was working on means to expand the payment method to other countries as well. Less than two months after making this announcement, Mr Musk posted a tweet in May stating that Tesla will no longer accept Bitcoin as a mode of payment.
What is Bitcoin?
Bitcoin is a decentralised currency that was created by an anonymous person, who is known by his online alias “Satoshi Nakamoto”, and the initial transaction occurred in January 2009. The currency has not yet been backed by any national or political authority and is owned and maintained by its users. Bitcoin was introduced as an alternative to conventional currencies and is not recognised as legal tender in any country. One Bitcoin is currently valued at about Rs 65000 as on August 22, 2017. What is the driving force behind Tesla’s move? The recent bitcoin bust has led to a fall in the value of the cryptocurrency in the last couple of weeks and the price has now dropped to a little over $6,000.
What are the benefits of using Bitcoin?
The cost of using Bitcoin is much lower than traditional payments systems and, therefore, it is a more favourable option for all those who are looking for a cheap and hassle-free mode of payment. The cost of using Bitcoin is dramatically lower than many of the bank transfers that one is likely to use. Moreover, Bitcoin transactions are secured by a digital and independent blockchain network, which allows the businesses or individuals involved in the Bitcoin transfer process to carry out the transactions without a third party involvement. This makes Bitcoin a safer mode of payments than those using traditional payment methods, which have been hacked and affected by fraudulent activities.
How do you use Bitcoin to purchase a Tesla?
At the moment, you can use Bitcoin to make your Tesla purchase from a reseller located in a few countries, including Germany and the Netherlands. At the moment, you have to go to a local reseller located in these countries to complete the payment process. In the United States, you can make the payment via a broker who arranges Tesla Motor Cars for you in the country and provide a transfer service for you. Tesla also accepts Bitcoin payment via the Tesla website if you have already registered for an account. It is not a secret that Tesla does not charge any cash deposit for a vehicle or a service delivery. You only pay the advance amount which is less than what you would have paid if you would have paid via cash.
Why did Tesla start accepting Bitcoin payments?
It is not clear as to why the company suddenly removed Bitcoin as a payment method for its vehicles. However, there is speculation that the move was a result of the crypto currency becoming more popular and people taking an increasing interest in investing in them. Regardless of the reason behind the move, Bitcoin still proved to be the primary mode of payment for Model S vehicles from February to April 2021. But after its ban, the popularity of Bitcoin in terms of the choice of payment dwindled and Tesla simply did not find a new way to accept cryptocurrency payments. What were the reasons behind Tesla’s decision to stop accepting Bitcoin payments?
Why did Tesla stop accepting bitcoin payments?
On the Twitter post Elon Musk made, he had revealed that the company has discontinued accepting Bitcoin payments owing to the high volatility of the cryptocurrency. The decision came as a surprise to many Tesla owners, and Elon Musk soon clarified that this decision was taken to ensure Tesla's solvency in the long run. He also revealed that he is not against cryptocurrencies, but the option to make such payments cannot be provided to customers when the uncertainty about the price of the cryptocurrency is high. He further added that the fluctuation in the price of Bitcoin may even change a customer's decision to buy a Tesla car. Elon Musk said that the Tesla team has made the decision to work off-chain with Ethereum instead. "That's the trade off: no volatility, or high transaction fees.
Given the drastic price fluctuations in the cryptocurrency market, it's safe to assume that Bitcoin price had a great influence on Tesla's decision. It is believed that more than a handful of Bitcoin holders had converted their holdings to fiat currency in order to avoid heavy losses in the case of Bitcoin going on a crash. If Tesla is seeking to cut its losses, then the decision to stop accepting Bitcoin as a mode of payment seems to be a sound one. However, the fact remains that Tesla has not revealed any plans regarding increasing its stock price on a daily basis. Despite an increase in demand for electric vehicles in the future, Tesla will face major challenges that could negatively impact its share price. The constant supply chain problem is just one such issue.