Cryptocurrency is still under pressure following tweets from Tesla CEO Elon Musk

 Cryptocurrency is still under pressure this morning following tweets from Tesla (NASDAQ:TSLA) CEO Elon Musk that rattled the market over the weekend. Bitcoin (BTC-USD) is down 8% to about $45,000, but it's off its lows today of just below $43,000. Ethereum (ETH-USD) is off 9% to around $3,500, with earlier lows nearing $3,100. Dogecoin (DOGE-USD) is down 5.5% to about  $0.45 having hit $0.59, earlier. "To clarify speculation, Tesla has not sold any Bitcoin," Musk tweeted just before 2 a.m. ET. A Twitter war broke out over the weekend between Musk and bitcoin fans, with Musk suggesting Sunday that Tesla has already or intends to unload its $1.5B in bitcoin holdings.


Musk was "taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins," Chris Weston, head of research at Pepperstone Group, writes in a note, according to Bloomberg. Musk began Sunday afternoon by making fun of MicroStrategy's (NASDAQ:MSTR) Michael Saylor, and things devolved from there. At one point, Musk pointed out that he's the guy behind PayPal (that's arguable), and how dare Bitcoiners try to tell him how money works. That provoked the natural response that Bitcoin is the anti-PayPal (decentralized vs. centralized).


Musk's outsize influence: The Tesla chief executive has found himself, and his huge social media following, as one of the arbiters of cryptocurrency sentiment of late. His mentions of Dogecoin have led to buyers flocking to the meme crypto that was started as a joke and he dubbed himself "Dogefather" in a promo tweet for his appearance hosting Saturday Night Live, which led to intense interest about how the coin would be worked into any sketches. He sent shockwaves through the crypto world last week when he said that Tesla would no longer be accepting bitcoin as payment because of his concerns about the amount of energy used in mining coins. Bitcoiners pointed out the fallacy in Musk's reasoning, noting mining has nothing to do with bitcoin transactions and everything to do with securing the network. He later expressed his confidence, saying "I strongly believe in crypto."


Twitter (NYSE:TWTR) and Square (NYSE:SQ) chief Jack Dorsey has also weighed in, but has had limited impact. Dorsey tweets that Square will "forever work to make bitcoin better" because it changes "everything" for the better in response to a report that Square had halted purchases after a $20M loss.


Frothiness: There is also an argument that Musk has given crypto holders a convenient reason to sell given the lofty heights hit. Riskier assets have faced pullbacks recently, with the Nasdaq falling for the fourth straight week, the first time that has happened since 2019. Tesla lost more than 12% last week. Bitcoin is down nearly 30% from its high in mid-April, but has still quadrupled over the past year.


Seeking Alpha contributor GS Analytics detailed Friday how Musk is a big risk for bitcoin. “If Ethereum, Dogecoin, and other current and future cryptocurrencies continue to emerge as an alternative to Bitcoin and each other, we will have an unlimited supply of cryptocurrencies to invest in,” GS Analytics writes. “They will no longer be a store of value due to this unlimited supply. This should be detrimental to the whole crypto space in the long run but its immediate impact should be reflected in the most established cryptocurrency – Bitcoin – which many investors consider as a store of value and are pricing it like it will maintain its leadership/monopolistic position in crypto space.”


Source: Seeking Alpha

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