Bitcoin has spent much of the past week in freefall after Tesla founder and CEO Elon Musk announced the electric vehicle manufacturer would stop taking payments in the cryptocurrency due to the environmental damage it is having.

“We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions by any fuel,” Musk tweeted on 12 May. “Cryptocurrency is a good idea on many levels…but this cannot come at great cost to the environment.”

The cryptocurrency is down as much as 20% to $42,213, as at 17 May, its lowest level since February, as Musk continued with another volley of tweets which sent shockwaves through the crypto market.

It appears on the surface Musk has finally realised the negative impact bitcoin has on the planet despite his electric vehicle company investing $1.5bn in the crypto in February.

ETF Stream wrote about the issue in February labelling Tesla, bitcoin and ESG an “unholy trinity” that brought into question Tesla’s sustainable credentials.

It is well documented how energy intensive the bitcoin mining process is. According to the University of Cambridge, bitcoin uses approximately 144 terawatt-hours a year which is more than Sweden and equivalent to Malaysia, which is home to 32 million people.

While institutional investors have significantly increased their exposure to bitcoin over the past two years, this rise is at odds with the growing focus on ESG and leaves them open to questions about how seriously they are taking the environmental crisis at hand.

Furthermore, Musk’s comments certainly increase scrutiny on institutions that are exposed to an asset that can nosedive just from a series of tweets.

As economist Jörg Bibow said: “Bitcoin is a purely speculative financial product that is also a natural disaster because of its huge energy consumption.”

The lack of intrinsic value behind the asset combined with the major environmental impact it is having especially as demand continues to surge are two big issues looming over the crypto space.

How the industry responds to the challenges, especially the environmental question, will be crucial if cryptocurrencies want to continue their meteoric rise.