Bitcoin prices plunged today, dragging down the majority of the larger crypto market following a tweet from Tesla CEO Elon Musk expressing concerns about Bitcoin’s use of fossil fuels and announcing that Tesla would no longer accept BTC for vehicle purchases.
In the three hours after Musk’s tweet, Bitcoin’s price dropped by around US$9,000, just as BTC had been consolidating around the US$55,000 price range. BTC’s market capitalization, for the second time in two weeks, has also fallen below the trillion-dollar level, to US$950 billion.
“BTC has seen a maximum drop of a staggering 27% in the last 24 hours, falling from 57,988 USDT to a new low of 45,750 USDT since early March at one point,” OKEx Insights Analyst Robbie Liu told Forkast.News.
It is not just Bitcoin that Musk’s words have knocked down, but the entire crypto market is now swimming in a sea of red today. Ethereum prices are down around 10% and back under US$4,000 less than 24 hours after posting a new all-time high of US$4,360. Similarly, Binance Coin, ADA and Dogecoin have all suffered similar declines of around 10% since the announcement. New joke coin Shiba Inu, a Dogecoin copycat popular in China, has also crashed, by around 25% .
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Although Bitcoin has since rebounded to the US$50,000 level, the announcement from Tesla, who previously made large purchases of Bitcoin, has shaken the crypto market’s short-term confidence.
Liu is uncertain if the decline has halted. “The rebound in the last few hours has been largely due to the closing of short positions, its sustainability remains to be seen,” Liu said.
Elon Musk: environmentally conscious?
Musk is now facing a Twitter backlash to his comments on two fronts: the environmental impact of Bitcoin as well as accusations that he is manipulating the market.
“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, in his tweet posted today.
Others in crypto were quick to try to shoot him down.
“Ironic because no incremental energy is used in a #bitcoin transaction. The energy is used to secure the crypto-asset network, and the net impact on fossil fuel consumption over time will be negative, all things considered,” tweeted Michael Saylor, the CEO of MicroStrategy.
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Equally unimpressed with Musk’s announcement was Anthony Pompliano, the founder of Morgan Creek Digital, contending that “this energy story has been debunked over and over again.”
Alex Tapscott, managing director of Canada-based alternative investment manager Ninepoint — which recently set aside a portion of its management fees to offset 100% of the carbon footprint of the Bitcoin held in the exchange-traded fund it operates — says “some of the fears around Bitcoin’s carbon footprint are a bit misguided.”
“Almost half of the energy input for the network actually comes from renewables,” Tapscott said, in an interview with Forkast.News, “but half of the big number is still a big number.”
But Max Song, co-founder of the Sustainable Bitcoin Standard Initiative, a Swiss-based not-for-profit foundation on a mission to make Bitcoin carbon neutral, says Musk is “recognizing the validity of environmental concerns” associated with Bitcoin.
“We believe that Bitcoin remains a valuable and attractive differentiated asset class for corporate treasury, but its environmental properties should be evaluated in line with ESG disclosure requirements for corporate ownership.” Song told Forkast.News.
Elon Musk: Market manipulator?
It is now a fact of life that Musk’s every public comment has a tendency to move crypto markets — particularly when it comes to Dogecoin and Bitcoin. Additionally, Tesla’s decision to accept Bitcoin as payment for its electric cars in March this year has been regarded as a significant catalyst for Bitcoin’s most recent bull run to a new all-time high of nearly $65,000 in April.
Now, some observers wonder if Musk is trying to instigate a “pump and dump.”
“[Musk] has been pulling the levers like the Wizard of Oz on crypto, and everyone’s following his every move — he’s sending Dogecoin up, he’s sending Bitcoin down, this is bullshit […],” tweeted Dave Portnoy, founder of Barstool Sports, a popular blog on sports and culture.“Elon, you have a responsibility when one second you say to buy something, and the next second you don’t – that’s playing with people’s futures and their fortunes.”
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Others on Twitter have called on the U.S. Securities and Exchange Commission to investigate Musk’s cavalier attitude to tweeting about cryptocurrency. It should be noted that Tesla continues to hold Bitcoin in its treasury, which is a positive for the original cryptocurrency.
Will Bitcoin’s bull run continue?
Something that Dogecoin followers may not yet be aware of is that while Musk may influence crypto prices, he and Tesla are far from the most significant factor driving Bitcoin and the crypto market’s value surge this year.
Last week the S&P Dow Jones launched a Bitcoin index, while Goldman Sachs has just announced it is now wading deeper into the US$1 trillion Bitcoin market, offering investors access to non-deliverable forwards (NDFs), a derivative tied to Bitcoin’s price that settles in cash. Both offerings provide Wall Street with a way to channel major investor capital into Bitcoin.
Goldman is not alone, with JPMorgan already announcing a Bitcoin fund for the summer, and Citibank is rumored to be the next in line. Other lenders include BNY Mellon, which announced in February it would begin financing Bitcoin and other digital currencies — eventually allowing cryptocurrencies to move in the same financial network it currently uses for traditional holdings like equities and Treasury bonds.
In the same week, it was revealed in a report by the World Economic Forum that Deutsche Bank is developing a Digital Asset Custody prototype for institutional clients and their digital assets.
See related article: Tesla pulls U-turn on Bitcoin payments amid founder’s environmental concerns
A Citibank note authored by Managing Director Thomas Fitzpatrick, addressed to institutional clients but leaked to social media last November, when Bitcoin was trading at around US$18,000, predicted that BTC prices would soar to around US$300,000 by the end of 2021.
Notwithstanding the current dip, Liu and other crypto analysts believe the fundamentals are there for a crypto bull run to continue. The rise in crypto prices has been led by Bitcoin’s adoption by institutional investors and corporate treasuries, of which Tesla is one but not the only one. Another factor is Bitcoin’s growing presence in the world of mainstream finance — as S&P Dow Jones, Goldman Sachs, JPMorgan, Citibank and BNY Mellon can attest.
Bitcoin price is hovering at $50,000, while Tesla shares have fallen nearly 5% to a price of US$589 at the time of publication.