Bitcoin rallies after Musk’s tweet of faith

Elon Musk

The price of bitcoin has risen above $40,000 after Elon Musk denied turning his back on the world’s largest cryptocurrency and manipulating its value.

The Tesla chief executive said that the electric carmaker would accept payments in bitcoin for its vehicles once miners of the digital asset could show that they were powered by renewable energy.

“When there’s confirmation of reasonable clean energy usage by miners with positive future trend, Tesla will resume allowing bitcoin transactions,” Musk tweeted.

His intervention on Sunday was prompted by a suggestion from another executive that he had committed “price manipulation”, an allegation that he dismissed as erroneous. Musk, 49, had cooled on the idea of using the cryptocurrency for car payments last month amid concerns about the environmental impact of miners’ activity.

Bitcoin rose by 9.4 per cent to $40,627.56 after the tweet before falling back to be up 2.9 per cent at $39,695.45 in New York last night.

The price also was bolstered further yesterday by an endorsement from Paul Tudor Jones, 66, the prominent hedge fund manager. “I like bitcoin as a portfolio diversifier,” he told CNBC. “Everybody asks me what should I do with my bitcoin? The only thing I know for certain: I want 5 per cent in gold, 5 per cent in bitcoin, 5 per cent in cash, 5 per cent in commodities.”

Andrew Bailey, governor of the Bank of England, said that the central bank was asking big questions about digital currencies and was searching for answers.

Bitcoin, which was created by a secretive software developer using the name Satoshi Nakamoto in 2008, has no physical form. While intended as an alternative means of payment for goods and services, the asset’s primary use has been speculative trading. Supporters argue that this is on the cusp of changing, amid significant interest from investors and consumers.

Musk has become one of the most prominent backers of bitcoin and other digital currencies. As a result, all his comments on the subject, no matter how cryptic or lighthearted, are watched closely by retail investors, who have poured money into the digital asset. Tweets from Musk often precede big fluctuations in the currency.

Tesla helped to push bitcoin higher in February when the carmaker revealed that it had invested $1.5 billion in the cryptocurrency and would start accepting it for payments. A rally, stimulated by signs of its shift from the fringes of global finance to the mainstream, resulted in its value of bitcoin more than doubling in the first three months of the year and peaking above $60,000 in mid-April.

However, Musk reversed his stance last month, accelerating a drop in the price. He said that he was concerned about the energy consumption required for bitcoin mining, the intensive computer-driven process through which new bitcoins enter circulation, and was reversing Tesla’s decision to accept the currency as payment for its vehicles.

A mysterious tweet from Musk this month, in which he posted #bitcoin followed by a broken heart symbol, further stoked fears among investors that the billionaire was falling out of love with the digital asset.

In April Tesla reported a $101 million profit after selling some of its big bet in bitcoin, but Musk has suggested it is unlikely to do so again soon. He wrote on social media this weekend that the carmaker had sold only about 10 per cent of its investment to confirm that the cryptocurrency “could be liquidated easily without moving [the] market”.

Bitcoin remains up by more than a third from where it started the year.