Tesla CEO Musk’s “change of heart”, cryptocurrency plunges across the board, there may be deeper reasons behind

Investors have doubts about the Fed’s confidence in keeping inflation under control, leading to a double dive in U.S. stocks and gold, which may be the deeper reason for bitcoin’s plunge.

Crypto coin flash crash! On May 12, bitcoin prices sank rapidly, falling nearly 15.29% in 24 hours, ethereum fell over 10%, ripple fell over 17%, shibcoin (shib) fell nearly 40%, and dogcoin fell 17%.

In news, Tesla CEO Musk announced on social media that Tesla has suspended accepting bitcoin as a payment method due to concerns about the environmental issues caused by mining. This may be the direct cause of this plunge in crypto coins.

However, several analysts told IFPI that an important logic behind the current round of bitcoin bull market is the Fed’s water release and the great abundance of dollar liquidity. However, the U.S. Consumer Price Index (CPI) rose much higher than market expectations in April, and investors have doubts about the Fed’s confidence that it can stick to controlled inflation, leading to a double dive in U.S. stocks and gold, which may be a deeper reason for this plunge in bitcoin.

Crowd Crypto Coins Suddenly Plunge
Bitcoin plunged again! On May 12, the price of bitcoin began to fall rapidly, dropping over $10,000 in a short period of time and touching a low of $45,500, down over $10,000 from the intra-day high, a 24-hour drop of nearly 15.29%.

Because of the bitcoin plunge, the crypto coin market as a whole saw a big drop, with ethereum down more than 10% and ripple down more than 17%. The recently hot mountain shiba dog coin fell by more than 40% in 24 hours at one point, and dogcoin (DOGE) fell by 17%.

Along with the crypto plunge, data from Bitcoin Homes shows that over 310,000 people blew their positions in the past 24 hours, and $24.175 billion in assets went up in smoke.

In fact, bitcoin plunges have been the norm. on the morning of April 23, bitcoin fell below $50,000 for the first time since March 8. Then at 1559 hours on the same day, bitcoin fell below $48,000. Previously, on the morning of April 18, bitcoin plunged nearly $8,000 in an hour, an intra-day drop of more than 15%.

The bitcoin flash crash also drove cryptocurrencies to a collective plunge. As bitcoin fell below the $50,000 mark, Ripple fell more than 15% and Ether fell more than 9% to near $2,253. Ether plunged 20%, BNB plunged 17%, Ripple plunged 26%, Dogcoin plunged 19% and Litecoin plunged 28% as Bitcoin plunged 15% intra-day.

Tesla CEO Musk's "change of heart", cryptocurrency plunges across the board, there may be deeper reasons behind

As of 5:55 p.m. on May 13, 2021, crypto coins have recovered a bit, but the overall value is still plummeting, according to Coindesk, with bitcoin down 14.1%, ethereum down 14.48%, boricoin down 15.57%, and dogcoin down 24.19%.

Musk “Short” Bitcoin
The plunge in bitcoin, and thus crypto, was directly attributed by most analysts to the “defection” of Tesla founder Elon Musk.

The most direct reason is that Musk’s shorting has caused panic in the market, said Jiang Zhaosheng, an analyst at Zero2IPO and a researcher at the Digital Asset Research Institute, to the IFPI reporter.

Liu Feng, director of the Blockchain Technology and Application Research Center at the Institute of Artificial Intelligence and Change Management at the University of International Business and Economics in Shanghai, told the IFPI reporter that Musk’s posting that Tesla suspended accepting bitcoin payments, conveying Musk’s bearish signal on bitcoin, led to many capital withdrawals (from the bitcoin market).

“Musk’s announcement that Tesla is suspending bitcoin purchases is one of the reasons for the current round of decline.” Jiang Mengchu, a senior analyst at FireCoin Group, told IFP, “Previous comments by Musk and Tesla’s operations have repeatedly affected the short-term price trend of bitcoin and dogcoin.”

On May 12, Tesla CEO Elon Musk tweeted, “Tesla is suspending the use of Bitcoin to pay for car purchases and is considering using a cryptocurrency with lower energy consumption. We are concerned about the rapidly increasing frequency of fossil fuel use in bitcoin mining and trading.”

But Musk went on to emphasize that cryptocurrency is a good step forward on many levels and Tesla sees promise in its future, but this cannot be achieved by making the environment pay a significant price. As part of its balance sheet, Tesla will not sell any bitcoin. Tesla intends to make transactions with Bitcoin as long as Bitcoin mining transitions to using other sustainable energy sources as soon as possible. Tesla also seeks to use other cryptocurrencies that consume less energy than Bitcoin.

The reporter learned that Musk announced this suspension of bitcoin purchases less than two months after Tesla announced it would accept bitcoin payments. According to Tesla’s U.S. website, the purchase of a Tesla car on March 24 already supports the use of bitcoin to pay. At that time, Musk also announced on Twitter, “You can now use Bitcoin to buy a Tesla.”

Tesla CEO Musk's "change of heart", cryptocurrency plunges across the board, there may be deeper reasons behind

Inflation is the deeper reason
While Musk’s short-selling of bitcoin directly triggered the crypto’s plunge, in analysts’ eyes, there is a deeper reason for bitcoin’s pullback.

Wang Haifeng, a senior researcher at Euclid Cloud Chain, told IFPI that the year-over-year rise in the U.S. Consumer Price Index (CPI) for April, which was released on May 12 EST, was much higher than market expectations, causing both U.S. stocks and gold to dive, which may be the deeper reason behind this plunge in bitcoin.

“One of the key logics behind the current round of bitcoin bulls is the Fed’s watering down and the great abundance of dollar liquidity. With market expectations for the Fed to raise interest rates by the end of 2022 rising sharply, it makes sense that bitcoin, the beneficiary of this round of liquidity abundance, is being smothered.” Wang Haifeng said that according to data monitoring related to the OKLink block browser, the number of wallet addresses holding more than one bitcoin has decreased since bitcoin hit an all-time high in April, which may also mean that some investors are choosing to sell bitcoin at current prices for profit.

Jiang Mengchu also said, “Investors have been worried about a sharp rise in inflation, as this could squeeze margins and erode corporate profits, and the Fed will be forced to tighten monetary policy if price pressures continue to overheat for some time. From this week’s market performance, investors have doubts about the Fed’s confidence that inflation can be kept under control. As a result, all three major U.S. stock indexes showed a weakness of three consecutive daily negative, and the crypto market also made a feedback of selling assets for the concern of tightening funds.”

Liu Feng pointed out that the main reason for this round of plunge is that the market has risen too fiercely, and “it is impossible to keep growing continuously, and the market must be adjusted back.” Recently, various animal coins in the crypto market are hot, with dog coin (DOGE) as the pioneer, which has risen nearly 10 times in the past month, and various animal coins such as Shiba Inu coin (SHIB), Akita dog coin (AKITA) and piggy coin (PIG) have started to pull up. LowB, SAOB, it can be said that the cottage coins are flying together.

Jiang Zhaosheng said, “In the current ‘crazy animal coin market’, a drop like this may not be a bad thing”.

“They are on fire partly due to the capital spillover effect in the context of the bull market and the rise of the community economy. However some of these coins are not technically innovative or mature, and the range of price fluctuations is inevitably large.” Jiang Mengchu said in his analysis.

As for the post-market trend, Jiang Zhaosheng said that the fundamentals of the bitcoin market may have also undergone some changes, and the post-market depends on whether bitcoin can stabilize the support level of $45,000, and if it does the bull market may continue.

Wang Haifeng pointed out that the aftermarket can be concerned about whether the Federal Reserve will have more action in the direction of interest rate hikes and tapering, on the other hand, you can also pay attention to whether the Bitcoin giant whales and institutions or entities including Tesla, which announced that they were buying Bitcoin, have a tendency to sell.

Jiang Mengchu cautions, “The recent decline suggests that bitcoin volatility is still relatively high, and because the equity mechanism behind it and the technology relying on it are significantly different from traditional investment assets, risk control needs to be put first when participating in bitcoin or other crypto assets, especially many new and untested coin investments. One should be patient and wait for the end of the long/short game and for the market to choose a direction before following”.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tesla-ceo-musks-change-of-heart-cryptocurrency-plunges-across-the-board-there-may-be-deeper-reasons-behind/
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