Bitcoin adoption was picking up pace. Elon Musk slamming its 'insane' energy use may have stopped that.

• Elon Musk's U-turn on accepting bitcoin as payment due to energy concerns rocked the crypto world.
• It could also halt the adoption of bitcoin by companies, who are increasingly climate-conscious.
• Yet enthusiasts argue that Musk remains committed and that cryptocurrencies will bounce back.

When Elon Musk's Tesla announced it had bought $1.5 billion of bitcoin and intended to start accepting it as payment in February, the cryptocurrency shot up and speculation abounded that other companies would soon follow suit.

But Musk stunned cryptocurrency fans on Wednesday when he announced that Tesla would stop accepting bitcoin due to fears that its "insane" energy use is hurting the planet. Bitcoin tumbled as much as 15% on Wednesday before recovering somewhat and was around 22% below its record high on Friday.

The idea that big companies - from Jack Dorsey's Square to Wall Street banks - are buying in or offering crypto services to clients has been a huge driver of the bitcoin boom, adding legitimacy and capital to the market.

But after the most famous crypto enthusiast criticized bitcoin's energy use, the question is, will companies continue to adopt bitcoin?

Bitcoin clashes with the ESG moment

A key problem for investors attracted by bitcoin's stellar returns is that the cryptocurrency moment has come at a time when environmental, social and governance (ESG) investing is center stage.

Yet, bitcoin uses more energy than Sweden each year, with vast amounts of computing power required to solve complex puzzles to secure the network and create new coins. Bitcoin's defenders say it increasingly uses renewable energy but a Bank of America report estimated that 72% of "mining" is done in China, where coal power dominates.

"Over the long term, it is difficult to see how this is consistent with a transition to a low carbon economy," said David Sneyd, vice president in BMO Global Asset Management's responsible investment team.

"We consider bitcoin, and other cryptocurrencies, to be a net negative from an ESG standpoint. As it currently stands, the positive potential of bitcoin remains unproven, but the negatives are very real and present."

None of this was a secret before Musk's bombshell tweet. But the backing of Tesla - the most famous electric car company in the world - undoubtedly made bitcoin enthusiasts feel more secure about the environmental impact of the digital asset.

On-the-fence companies may think twice

Edward Moya, senior market analyst at currency platform Oanda, told Insider: "A large part of Wall Street has embraced the ESG movement and while Musk didn't reveal anything new, he brought bitcoin's CO2 problem center stage."

Moya said: "Tesla was the first domino that was supposed to unleash a steady wave of fresh interest across corporate America." But Musk's move could now "have a big impact on companies that were on the fence about accepting bitcoin as a form of payment or even putting on their balance sheets," he added.

There are some signs that other advocates are cooling on the digital asset, with Square telling Financial News it had no plans to purchase more bitcoin. The fintech company, founded by Twitter chief executive Jack Dorsey, has been one of bitcoin's biggest supporters and corporate buyers.

For some, companies buying bitcoin to hold on their balance sheets was always a bad idea, which was never likely to be copied by many big players.

Jerry Klein, managing director of Treasury Partners in New York, told Insider: "We don't believe there ever was a case for adding bitcoin to corporate balance sheets.

"The vast majority of public companies are focused on cash preservation and don't want to hold volatile assets. Most treasurers and CFOs see only downsides in taking risk with corporate cash."

Die-hard bitcoin fans look set to keep buying

However, Oanda's Moya said that die-hard companies that have bet big on bitcoin look unlikely to change their mind any time soon.

Michael Saylor, chief executive of technology company MicroStrategy, which has bought more than $2 billion of bitcoin, quickly questioned Musk's move on Twitter. He also announced he had ploughed more money into the cryptocurrency.

David Wachsman, CEO and founder of communications firm Wachsman, told Insider that it is important to recognize that Musk himself has said he remains committed to cryptocurrencies.

"Lost in the hyperbole of the headlines is Tesla's decision to continue to hold bitcoin on its balance sheet," Wachsman said.

"This demonstrates its long-term commitment to cryptocurrencies as a technology, and is a pertinent reminder to other corporations of the risk of being phased out of the market without moving on digital currencies."

Yet in the meantime, it appears Musk's criticisms have focused investors' minds on bitcoin's problems, with numerous financial companies releasing reports into the environmental impact.

In a note to clients, analysts at Swiss bank UBS wrote: "The prospect of large gains may tempt investors, but we think speculation in crypto is a gamble, not an investment."