For the first time since February, bitcoin touched $42,000, resulting in the liquidations of up to $2 billion in trading positions. The dip seems to have emanated from a war between Elon Musk, Tesla’s CEO, and the hardline Bitcoin community in a test of the former’s social power.
Recall that Elon recently posted that Tesla, which in February added bitcoin worth $1.5 billion to its balance sheet, will no longer accept bitcoin as payment for sales of its Electric cars. Tesla cited environmental concerns as reasons for rescinding its support for bitcoin, saying:
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Tesla will not be selling any Bitcoin as we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin's energy/transaction”.
Like a lightning transition, Elon Musk, who was almost replacing Michael Saylor, CEO of Microstrategy, received a lot of backlash as Bitcoin’s poster boy. Some of the vocal critics included Safedein Ammous, author of Bitcoin Standard, Peter McCormack, host of What Bitcoin Did and Anthony “Pomp” Pompliano of Morgan Creek Digital.
Elon Musk, not known to backtrack on any issue, characteristically doubled down on his stance, citing further that the Bitcoin network is highly centralised. Responding to Peter McCormack’s tweet thread where one respondent mentioned how Dogecoin is more centralised than Bitcoin on Sunday 16th May, Musk said:
“Bitcoin is actually highly centralised, with supermajority controlled by a handful of big mining (aka hashing) companies”
Elon Musk wrote, replying to a post that claimed Dogecoin was highly centralised.
“A single coal mine in Xinjiang flooded, almost killing miners, and Bitcoin hash rate dropped 35%. Sound decentralised to you?”
Even though he had called Dogecoin a “hustle” in an edition of SNL where he featured as the superstar guest, Elon Musk’s recent tweet suggested that he might be considering DOGE as a suitable replacement for the jilted Bitcoin.
“Ideally, Doge speeds up block time 10X, increases block size 10X & drops fee 100X. Then it wins hands down”
These negative sentiment tweets from Elon Musk has led to massive sell-offs, resulting in at least a 28% fall in price from Bitcoin’s recent April 13th ATH at $63,500. The current market dip however is not a clear signal of the end of the bull run as it is still yet to match the 2017 bull season duration. Data from blockchain and cryptocurrency analytics platform, Glassnode shows that the current bull run has lasted for around 200-days, which is relatively short compared to the year-long bull run in 2017.
Even though the market rebounded slightly, with BTC price climbing back to $45,000, ETH recovering to $3,500 and the market gaining an overall $400 billion in market cap, the recovery appears short-lived. BTC price has dropped again below $43,000 while ETH trades around $3,200 at press time. On the overall, the total cryptocurrency market cap has fallen below $2 trillion, losing an aggregate of 10% as the bloodbath continues.
The dip truly is a test of Elon’s social power which many of the Bitcoin faithful like Nic Carter have said will fail in bringing Bitcoin to its heels.
“Bitcoin survived its own most elite developers rage quitting and denouncing the system. Bitcoin survived a majority of miners proposing game-breaking changes. Bitcoin survived an attempted corporate takeover. It can survive an unstable centi-billionaire's mood swing”
To douse any further speculation, Elon Musk reiterated that Tesla has not sold its Bitcoin holdings and doesn’t intend to do so in the shortest possible time.