Bitcoin hits 3-month low, then rallies as Elon Musk’s tweets whipsaw token

Mr Elon Musk spent hours hitting back at users on Twitter who criticised his change of stance on bitcoin last week.
Mr Elon Musk spent hours hitting back at users on Twitter who criticised his change of stance on bitcoin last week.PHOTO: REUTERS

SINGAPORE (REUTERS) - Bitcoin rallied from three-month low on Monday (May 17) in a volatile session that saw investors initially selling and then buying cryptocurrencies in the wake of Tesla boss Elon Musk’s tweets about the carmaker’s bitcoin holdings.

In his latest tweet, Mr Musk said “Tesla has not sold any bitcoin”. That seeming clarification came after his weekend tweets that hinted Tesla is considering or may have already sold some of its massive holdings.

Mr Musk has boosted crypto markets with his enthusiasm for the asset class, but has lately 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 per cent on Monday to as low as US$42,185 (S$56,222), its lowest since Feb 8, but rallied more than 5 per cent to around US$44,220.

Ether, linked to the ethereum blockhain, fell even more to as low as US$3,123.94, and then rallied to US$3,400. Dogecoin fell nearly 7 per cent to US$0.48, and all three are well under recent records.

“Elon Musk has been the catalyst to this, but ultimately it just comes down to the nuts and bolts of what crypto really is: it’s a store of value, but it’s also a momentum vehicle, and right now the momentum is to the downside,” said Chris Weston of brokerage Pepperstone in Melbourne.

“Why would I want to buy bitcoin right now - even if I’m bullish - until the liquidation is over and you see some consolidation in price?” Mr Weston added.

On Wednesday, Mr 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 @elonMr Musk is getting, I wouldn’t blame him...,” Mr Musk wrote: “Indeed”.

It was not clear whether he was confirming sales or whether he referred only to the fact that he had faced criticism, until his clarification in Monday’s tweet.

Mr Musk said Tesla would not sell its bitcoin, but the cryptocurrency has dropped by almost a quarter since Mr Musk’s reversal on Tesla taking it as payment.

On Tuesday, Reuters reported Tesla is seeking to enter the multi-billion dollar US renewable credit market, hoping to profit from the Biden administration’s march toward new zero-emission goals.

Dogecoin is also yet to fully recover from Mr 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 per cent, 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 Pepperstone’s Mr Weston.

“I am closing the short-bitcoin/long-ethereum trade and moving to the sidelines,” he added. “I feel the dust really needs to settle here.”