In the span of several weeks, the ‘joke’ coin has rocketed in value, with help from Musk and massive daytrader momentum.
Bitcoin slashed to a three-month low on Monday as investors sold cryptocurrencies in the wake of Elon Musk hinting over the weekend that Tesla is considering selling or may have already sold some of its Bitcoin holdings.
Musk’s ardent support for cryptocurrencies has boosted crypto markets in the recent past. But lately, he has roiled trade by appearing to cool on Bitcoin in favour of its one-time parody, dogecoin. The gyrations are beginning to spook even steeled traders.
Bitcoin fell more than 9 percent on Monday to $42,185, its lowest since February 8, while ether, linked to the ethereum blockchain, fell about 8 percent to $3,227.22. Dogecoin fell nearly 7 percent to $0.48, and all three are well under recent records.
Musk’s disclosure in early February that Tesla had invested $1.5bn in corporate cash to buy Bitcoin sent the token’s price to a record high and lent legitimacy to virtual currencies, which have come closer to being a more mainstream asset in recent months despite lingering scepticism.
But in the past week, his online commentary shook the crypto faithful even as Musk reiterated his support for digital currencies overall.
Last week Musk said Tesla would stop taking Bitcoin as payment, owing to environmental concerns about energy use to process transactions. Defending that decision on Sunday, he suggested Tesla may have sold its own holdings.
In response to an unverified Twitter account called @CryptoWhale, which said: “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their #Bitcoin holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…,” Musk wrote: “Indeed”.
It is not clear whether Musk was confirming sales or whether he referred only to the fact that he had faced criticism.
Last week, when Musk said Tesla would stop accepting Bitcoin as payment, he also said Tesla would not sell its Bitcoin, but the cryptocurrency has dropped by almost a quarter since Musk’s reversal on Tesla taking it as payment.
Dogecoin is also yet to fully recover from Musk describing it as a “hustle,” although he did boost the price last week by saying he was working to improve its efficiency.
For an asset class that has surged this year, with dogecoin up about a hundredfold, ether up more than fourfold and Bitcoin gaining 45 percent, some are beginning to call time on the wild ride.
“Our weekend trading has kicked up, and we’re looking at some serious liquidations through the exchanges,” said Chris Weston of brokerage Pepperstone in Melbourne. “I am closing the short-Bitcoin/long-ethereum trade and moving to the sidelines, as I feel the dust really needs to settle here,” he said.