After Tesla billionaire Elon Musk and Ethereum co-founder Vitalik Buterin sent shockwaves through the sector, bitcoin and cryptocurrency markets dropped by about $300 billion overnight and then slowly went back up.
The price of one bitcoin briefly fell below the closely watched $50,000 level before going back up. Dogecoin, a meme-based cryptocurrency that has become very popular in recent months, led the crypto market down with a 10% price drop.
Buterin, the world’s youngest known crypto billionaire, moved over $2 billion worth of cryptocurrency all at once. The sudden drop was made worse by the shocking news that Tesla billionaire Elon Musk will stop letting customers use bitcoin to buy Tesla cars.
Yesterday, Buterin gave $1 billion in dogecoin-inspired meme tokens to the India Covid Relief Fund and a number of other charities. He also moved $1.3 billion worth of ether tokens from his main public address to a separate wallet.
People worried that the co-founder of Ethereum was about to sell some of his huge cryptocurrency holdings. This sent the price of ethereum down from its recent high of over $4,000 per ether token and sent dogecoin down sharply.
This year, the cryptocurrency market has grown to more than $2 trillion. Bitcoin, the largest cryptocurrency in the world, now has a market capitalization of about $1 trillion. The growth of the crypto market has also been helped by the skyrocketing price of ethereum and the meme-fueled speculation frenzy around dogecoin.
Elon Musk, the CEO of Tesla and a long-time supporter of bitcoin, said that his company would stop letting customers pay for cars with bitcoin.
Musk said on Twitter, “Cryptocurrency is a good idea in many ways, and we think it has a bright future, but this can’t come at a high cost to the environment.”
Musk’s help pushed the price of bitcoin to over $60,000 earlier this year. He said that the way miners, the people who keep the bitcoin network safe, power their machines is bad for the environment.
Tesla said in February that it had bought $1.5 billion worth of bitcoin, and in March it started accepting bitcoin as payment for cars. This made the price of bitcoin go up by 20%.
Alex Kuptsikevich, a senior financial analyst at FxPro, said in an email that Elon Musk can almost do whatever he wants with bitcoin’s price. He said it won’t be a surprise if Telsa next announces that it has sold some of its bitcoin, and that could cause “an even fiercer sell-off.”
“This heavy reliance on the outlook of the whole market on the words of one big investor is a huge hole in the crypto market, showing how vulnerable it is. It should be noted that bitcoin’s drop happened at the same time as a correction in the S&P 500. This shows once again that the investors in both markets may be very similar.”
Musk did say, though, that Tesla would keep bitcoin on its balance sheet and that it hoped to start using it again in the future. He also said that the company, which is said to want to get into the multibillion-dollar renewable credit market in the U.S., is looking into other cryptocurrencies that are better for the environment.
Musk said, “We are also looking at other cryptocurrencies that use less than 1% of the energy that bitcoin uses per transaction.”
After Musk’s bitcoin bombshell, the price of bitcoin dropped by about 17% before it started to make up some of its losses. During after-hours trading, the price of Tesla’s stock also went down.
Laith Khalaf, a financial analyst at brokerage AJ Bell, said in an email that “Tesla and bitcoin have always seemed like strange bedfellows, given that Tesla is a green company and that bitcoin uses a huge amount of energy.”
“Right now, environmental issues are a very touchy subject, and Tesla’s move could be a wake-up call for businesses and consumers who use bitcoin but hadn’t thought about its carbon footprint before. Tesla may have made $101 million in the first three months of the year by selling bitcoin, but investors have a right to wonder if that money could have been spent better elsewhere.
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