Bitcoin hits 3-month low and then rallies on Musk tweets
Bitcoin recovered from a three-month low on Monday in a wild session that saw investors sell and then buy cryptocurrencies in response to Tesla CEO Elon Musk’s tweets about the carmaker’s bitcoin assets.
Musk said in his most recent post, “Tesla has not sold any bitcoin.” The apparent clarification came after tweets over the weekend suggested that Tesla (TSLA.O) was exploring or may have already sold any of its vast holdings.
Musk’s zeal for the asset class has bolstered blockchain stocks, but he has recently roiled trading by appearing to cool on bitcoin in favour of its one-time spoof, dogecoin. The gyrations are starting to frighten even the most hardened traders.
Bitcoin dropped more than 9% on Monday, reaching a low of $42,185, its lowest since February 8, before rallying back to about $45,190 as of 0911 GMT.
Ether, which is attached to the ethereum blockchain, dropped as low as $3,123.94 before rebounding to $3,540. Dogecoin dropped nearly 7%, and all three are far below recent highs.
“A good pop, but this is tiny compared to the recent Musk-induced sale,” said Neil Wilson, chief market analyst at Markets.com. “There is nothing fresh I can tell regarding bitcoin – it is unpredictable, extremely unstable, and easily manipulated; it is a bubble.”
Bitcoin, which was developed as a payment instrument, is seldom used for trade in major economies, owing to high uncertainty and comparatively expensive transactions.
The most common digital currency is now down a third from its record high in mid-April, according to JPMorgan’s analysis of fund flow results, and investors have been selling positions in recent weeks.
Musk announced on Wednesday that Tesla would no longer accept bitcoin as payment due to environmental issues regarding the resources used to process transactions. On Sunday, he defended the action, speculating that Tesla might have sold its own holdings.
Unverified Twitter account @CryptoWhale stated: “Bitcoiners will slap themselves next quarter when they learn Tesla has sold the majority of their #Bitcoin holdings. With the volume of vitriol directed at @elonmusk, I can’t blame him…”
Musk responded with, “Indeed.”
Before his explanation in Monday’s tweet, it was unclear if he was acknowledging revenue or just referring to the fact that he had received backlash.
Musk said that Tesla will not sell its bitcoin, but the cryptocurrency has fallen by nearly a quarter after Musk’s change of heart about Tesla accepting bitcoin as payment.
Dogecoin has yet to completely recover from Musk referring to it as a “hustle,” though he did raise the price last week by stating that he was trying to increase its production.
For an asset class that has soared this year, with dogecoin more than a hundredfold, ether more than fourfold, and bitcoin rising 45 percent, others are calling it quits.
“Why would I want to purchase bitcoin right now, even though I’m bullish, before the liquidation is done and there is any market consolidation?” said Chris Weston of Melbourne brokerage Pepperstone.
“I’m exiting the short bitcoin/long ethereum exchange and heading to the sidelines,” he said. “I think the dust ought to settle here.”