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The world of cryptocurrencies has faced quite a meltdown over the weekend as the crypto community engaged in a massive Twitter storm, which caused the price of Bitcoin and other tokens to sharply collapse amid a scenario where currencies were already facing major selling pressure. As a consequence, prices have plummeted even further, adding more anxiety to a market that was already on the verge of seeing its investors have a nervous breakdown and start selling off their assets since last week. And it all started with the most controversial billionaire and most loathed personality amongst bitcoin holders: Tesla CEO Elon Musk.
The market for Bitcoin was already on shaky ground after the billionaire’s recent opinions seemed to go against what he had been preaching in recent months. In February, Tesla announced the purchase of $1.5 billion in Bitcoin as the first move to accept cryptocurrency as a means of paying for its electric vehicles. At the time, the digital currency jumped 15 percent in a few hours and almost 60 percent for the day. However, last Wednesday, Musk revealed on his Twitter that Tesla would no longer accept Bitcoin in the payment of its vehicles, alleging that cryptocurrency mining has a huge environmental impact on the planet.
That was enough to spark a heated backlash amongst hard-core fans of the Bitcoin community, who ceaselessly criticized the executive’s statement on Twitter. On Sunday, Musk spent hours hitting back at several different users on Twitter who slammed his claims that the power demand to process Bitcoin transactions was aggravating environmental problems. Given that the billionaire has a cult-like following on social media, the Twitter storm quickly evolved into a huge fuss after he called Bitcoin “highly centralized” and teased the Bitcoin fan base by tweeting: “Hey cryptocurrency ‘experts’, ever heard of PayPal? It’s possible, maybe, that I know [more] than you realize about how money works”. Peter McCormack then answered his comment: “[Do] you mean the company which froze Wikileaks account? The company which routinely censors payments?”
The dispute got so heated that one user suggested Musk should dump his Bitcoin as a result of the treatment he was getting. The user identified as “Crypto Whale” 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,” to what Musk replied “indeed,” hinting that his company could sell off its reserves of the digital currency. With a single word, the CEO triggered a major crash on several cryptos. This even caused the following headline to pop in the Bloomberg terminal: “Musk implies Tesla may sell or has sold Bitcoin holdings”.
On Monday, Bitcoin collapsed shocking 9.2 percent, trading at $42,930, its lowest mark since February. The move also drove other cryptos down, such as Ether that crashed 9.5 percent, trading at $3,237; and Binance Coin going down by 12.2 percent, at $502.90. The executive even tried to calm down the storm by replying to another user: “to clarify speculation, Tesla has not sold any Bitcoin”. However, that wasn’t enough to reverse the significant losses faced by the cryptocurrency market. Last week, when Tesla announced the suspension of Bitcoin on sales, Musk said the company would not sell its holdings because it planned to use the digital currency again for commercial transactions once the mining process became “more sustainable”.
“For many crypto assets such as Bitcoin and Ethereum, the long-term story has not changed,” argued Simon Peters, an analyst at multi-asset investment platform eToro. “This emerging asset class continues to revolutionize many aspects of financial services, and while nothing goes up in a straight line, the long-term fundamentals for crypto assets remain as solid as ever,” he said. But in the short-term, for the crypto market, while Musk is out, volatility is on. And with increasingly more investors still selling off their Bitcoin holdings, the real effects of the carnage may only become clear by the end of the week. Hopefully, all of this money being drawn from cryptos won’t end up being poured into other bubbly assets, otherwise, it won’t be just a one-off carnage, but a full-blown catastrophe.