Sunday afternoon Bitcoin broke all records to reach the $58,000 mark. All was going well for Elon Musk too who was the world’s richest man.
Come Monday, Bitcoin sank as much as 17% plummeting down below $50,000, a feat which it has achieved in the past year by rising 400%. It lost more than $8,000 in just a day. At the same time, Tesla Inc., owned by Elon Musk, lost its share price by 12.2% by Tuesday. Musk himself lost his top spot among the richest shedding $15B from his wealth.
Bitcoin price and Elon’s wealth seem to share some connection. And yes there is one. Let’s check out what is it and what does it mean for the fate of the cryptocurrency.
Series of Events After Bitcoin Tweet by Elon Musk
In an interview with Bloomberg, Changpeng Zhao, CEO of the largest cryptocurrency exchange Binance, points that Tesla bet $1.5B on Bitcoin but not on Dogecoin. It is noteworthy that Tesla CEO, Elon Musk has been a big propellant of Dogecoin. His series of tweets last month in which he endorsed the cryptocurrency, spiked its price by 420%.
To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla.
However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.
Bitcoin is almost as bs as fiat money. The key word is “almost”.
— Elon Musk (@elonmusk) February 19, 2021
Elon Musk has been a big shot supporter of Bitcoin and said that it is on the verge of getting broader acceptance from the traditional finance world.
Call it an Elon effect or Bitcoin effect, but both Bitcoin and Tesla shares have gained momentum after these developments. Following the purchase of Bitcoins worth $1.5B by Tesla, the bitcoin price recorded a new high of $44,900 picking up from $30,000. Earlier, when Elon Musk added #bitcoin to his Twitter bio last week, the digital currency’s price was pushed up by as much as 20%. Analyzing Tesla’s investment in BTC, Wedbush Securities pointed that Tesla is on a path to make more from its bitcoin investments than profits from selling its electric cars in all of 2020. Tesla opted for bitcoins as a reserve asset when it was around $33,000. Its profit from the investment accounts for roughly $1.3 billion in just 45 days.
Recent events in the market signal that their fate is now tied with each other. A Twitter feud that followed Elon Musk’s comments and its aftermath indicates the same.
An economist and cryptocurrency skeptic from Connecticut, Peter Schiff, pointing to the above-mentioned comments of Elon Musk, expressed his opinion about Bitcoin in a tweet.
He referred to Bitcoin as a digital fiat and even more bullshit than the paper fiat issued by central banks. He supported gold as real money and better than both. Furthermore, he discarded Bitcoin as ostensible, which requires a trust layer maintained by a network of miners to prove its existence while gold being a physical asset doesn’t require anything to power its existence. His comments also pointed to the inefficiency of bitcoin to be used anywhere.
That said, BTC & ETH do seem high lol
— Elon Musk (@elonmusk) February 20, 2021
His tweet immediately started a spat among Twitterati on the superiority among gold, conventional cash, and bitcoin. Elon Musk joined and replied to the user that fiat money is just some data that is subject to latency and error. He added that the price of BTC and ETH does seem high. His warning of elevated crypto pricing began showing its effects on the market.
The After Effects
The tweet directly backfired on Elon Musk and Tesla. He lost his title of world’s richest person to Amazon CEO, Jeff Bezos and slid down to 2nd position. It also dragged Tesla shares to their lowest since December extending its three-day losing streak. Falling 8.6% on Monday followed by a drop of as much as 12% to $627.10 on Tuesday, Tesla shares today’s value is at $698.84. Tesla’s total market cap has dropped by $200B.
As for the Bitcoin price, it plunged more than 10%. The value of the cryptocurrency market heavily dominated by Bitcoin has tanked to about $900 billion today from a high of $1.1 trillion early Sunday morning.
Image source: ycharts
Experts are not happy with these volatile swings driven by individuals on cryptocurrencies. Many consider bitcoin to be not a great store of value if a man’s tweet can crash it. The price crash simply shows how much control he holds on the crypto market. Analysts have now raised caution signs over the cryptocurrency.