Justifying the move, he said on Wednesday at the B-Word conference, an event hosted by the Crypto Council for Innovation: "It looks like bitcoin is shifting more toward renewables and a bunch of the heavy-duty coal plants that were being used...have been shut down, especially in China.
“I want to do a little more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50% and that there is a trend toward increasing that number."
If this is the case, Tesla will likely readopt sales in bitcoin, he said.
Prices moved higher following the comments with bitcoin heading 4.4% up to $32,159 (£23,423) in early trade in London.
Ethereum (ETH-USD), the second most popular cryptocurrency also gained 7.3% in early trade — heading above the $2000 mark.
In May, Musk stopped the use of bitcoin for car purchases due to questions surrounding its environmental impact— a move that erased 10% of bitcoin's value in one day.
The use of bitcoin to buy Tesla's electric vehicles had highlighted a dichotomy between Musk's reputation as an environmentalist and the use of his popularity and stature as one of the world's richest people to back cryptocurrencies.
Some Tesla investors, along with environmentalists, have been increasingly critical about the way bitcoin is "mined" using vast amounts of electricity generated with fossil fuels.
Since then there has been a crackdown on mining in China, with many expelled from the country.
The cryptocurrency's price has convulsed in recent months as a result of various moves by states and countries, knocked off all-time highs of more than $63,000 in April to trade at around half that just months later.
Watch: What are the risks of investing in cryptocurrency?