All Bets are Off: Elon Musk Pulls the Plug on Paying Bitcoin for a Tesla
The internet’s favorite corporate personality does not cease to surprise. Elon Musk’s most recent attention-grab found the man, himself, live on TV from New York City.
A week earlier, he tweeted the shocker. “The Dogefather S.N.L. May 8,” a cryptic message that everyone understood to mean Musk would be joining the Saturday Night Live cast for the weekly program.
Read More »But, without batting an eye, he exclaimed, “To the moon!”
There is no limit to this currency
Dogecoin does not have a ceiling like Bitcoin which is limited to 21 million tokens. Some say it is subject to inflationary risks. “To the moon,” one of Musk’s favorite Dogecoin remarks refers not just to where he wants to see the value go, but also to those risks some identify as the downside to Doge.
The day after he hosted, Musk publicized his pet crypto whilst Doge trades went berserk to the downside. He shared big news: “SpaceX launching satellite Doge-1 to the moon next year,” the provocateur tweeted. The launch will be paid for in Dogecoin, according to the tweet.
By Monday, May 10, the Doge had recovered and traded up.
He is becoming a celebrity in front of our very eyes. But should a profiteer have free and unlimited access to media? Should he advertise to a growing number of impressionable fans?
On S.N.L. Musk agreed that Dogecoin is a hustle. So, it could be that Musk is hustling the world into buying his company’s cars with his currency.
Elon Musk disclosed dumping $1.5 billion into Bitcoin this year. And he appears to be even more committed to Doge. A recent Twitter poll posted by Musk shows a strong majority of followers want to be able to purchase a Tesla with Dogecoin. Perhaps this option will be announced in the Dogefather’s next trending tweet.
Musk holds a lot of power. His influence over potential investors is virtually unprecedented. A Musk fan who puts cash into a cryptocurrency may be able to purchase a Tesla, but is it a good deal?
No deal. Bitcoin purchases are off the table
On Wednesday afternoon, Musk surprised everyone again. Buying a Tesla with Bitcoin is not an option. In a statement by Musk, the electric car company he heads is not accepting any Bitcoin due to environmental concerns. He said, “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 said that Tesla is open to using Bitcoin in the future. He said Tesla intends “to use it for transactions as soon as mining transitions to more sustainable energy.”
The process of mining bitcoin is energy intensive. It uses powerful computers that compete against one another to process complex mathematical problems. Production releases about 22 metric tons of carbon dioxide annually, according to Reuters. There is no physical coin involved in the currency, but it creates waste. Environmentalists have been citing inconsistencies with the electric car company ever since Tesla announced the Bitcoin buying option.
Environmental concerns aside, should Tesla accept Bitcoin?
Whenever the option is available again, there are few things to know before buying Bitcoin and putting it into a Tesla. In fact, after looking at the fine print, it may make more sense to stick to purchasing the vehicle with dollars.
How tax laws effect a Tesla purchase
A Bitcoin buyer and seller might not be aware of cryptocurrency tax laws. If not, a tax liability might come as an unwelcome surprise.
Essentially, the buyer must pay a capital gains tax on the purchase amount. If you bought the Tesla for $30,000 worth of Bitcoin, for instance, you would pay taxes on that amount which is considered a capital gain.
The I.R.S. decided in 2014 that cryptocurrency is treated as a capital asset, just like stocks. However, there is an exception and some good news. If you sell or spend your Bitcoin at a loss, you will not owe capital gains taxes.
What else should we know before buying a car with alternative currency?
There is some additional fine print that one will want to consider before making the move to purchase with virtual currency. While Tesla offered Bitcoin payment, its disclosure statement included important warnings regarding refunds and buybacks. The information, presented in all uppercase letters, stated that you could lose money by using Bitcoin.
From the Tesla statement:
“THE PRICE OF BITCOIN CAN BE VOLATILE AND THE VALUE OF BITCOIN RELARTIVE TO US DOLLARS MAY DECREASE OR INCREASE BETWEEN THE TIME THAT YOU MAKE YOUR PURCHASE AND THE TIME THAT WE PROVIDE A REFUND OR BUYBACK.”
The purchase price of a Tesla is based in U.S. dollars. If you want to sell back for an upgrade or if you need a refund, any change in value of Bitcoin to the dollar, which can be volatile, is going to be based on the dollar amount that was paid.
In other words, if you need a refund on your Tesla purchase, you could, potentially, get back half the value of the Bitcoin that you invested in the car. If the crypto markets have a bad day, you could lose half of what put into the car.
Also, there is no upside if Bitcoin values rise. if Bitcoin outdoes the dollar, the Tesla disclosure statement says, “YOU ARE NOT ENTITLED TO RECEIVE ANY APPRECIATION ON THE VALUE OF THE BITCOIN THAT YOU PROVIDED TO US AS PAYMENT . . .”
To be clear, Tesla stated, “YOU ASSUME THE RISK OF BITCOIN PRICE DEPRECIATION AND APPRECIATION AND WILL HAVE NO RIGHT TO SELECT THE METHOD OF REFUND.”
All the above legal information had been located at www.tesla.com/support/bitcoin. Currently, the link is no longer active. Buying a Tesla with Bitcoin is on hold. Stay tuned for The Dogefather’s next applicable tweet.
The hype vs. the dependable dollar
At the end of the day, buying a car in dollars is much simpler. Elon Musk has been championing Bitcoin and offering the car buying option. He is fully invested in this effort. Ultimately, his pitch to purchase a Tesla with Bitcoin was a gimmick and part of his larger media campaign to mainstream the acceptance of digital currency, irrespective of making money for people.
On S.N.L., Musk boasted, “113 billion [Dogecoin] have already been mined.” The true test is whether those miners make a profit by the Doge adventure. Or live to regret it.
