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Bitcoin plunges to $50,000 after Elon Musk's tweet sent price down 17%

We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel, Musk wrote

twitter-logoReuters | May 13, 2021 | Updated 09:02 IST
Bitcoin plunges to $50,000 after Elon Musk's tweet sent price down 17%

Bitcoin rebounded to about $50,000 in Asian trading on Thursday after plunging as much as 17% after Elon Musk tweeted Tesla Inc had stopped accepting bitcoin to purchase its vehicles due to climate concerns.

The price of the world's largest cryptocurrency dropped from around $54,819 to $45,700, its lowest since March 1, in just under two hours following the tweet shortly after 2200 GMT. It recovered about half of that drop early in the Asian session, and last traded about $50,196.

Ether, the world's second-largest cryptocurrency, followed a similar pattern, also dropping 14% to touch a low of $3,550, before bouncing back to about $3,965. "We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel," Musk wrote.

Tesla's announcements earlier this year that it had bought $1.5 billion of bitcoin and that it would accept it as payment for cars has been one factor behind the digital tokens' surging price this year. As a result, Musk's comments roiled markets even though he said Tesla would not sell any bitcoin and would resume accepting bitcoin as soon as mining transitioned to more sustainable energy.

"The issue (of huge energy use by bitcoin miners) has been long known so it's nothing new. But taken together with Musk's recent comments about dogecoin, his latest comments seems to suggest his passion for cryptocurrencies may be waning," said Makoto Sakuma, researcher at NLI Research Institute in Tokyo.

A broader selling of risk assets in traditional markets was another factor in the plunge, said Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider. "I don't think everything is selling off just because of this news. This was kind of the straw that broke the camel's back in terms of adding to the risk sell-off," he said.

On Wednesday, the S&P 500 dropped 2.1%, and the Nasdaq Composite lost 2.7%. Smaller cryptocurrencies were less affected by the news.

"Interestingly enough, altcoins are performing well. The reason given in the tweet is fossil fuel use for the mining of BTC, but most cryptocurrencies have already found more efficient ways to do that and therefore outperformed," said Justin d'Anethan, sales manager at Hong Kong-based head of exchange sales at Diginex, a digital asset company.

The bitcoin dominance index, a ratio of bitcoin's market cap to the total market cap of all cryptocurrencies dropped further to 42, its lowest level since June 2018. A figure of 100 would indicate all cryptocurrency holdings were bitcoin.

Also read: Elon Musk goes back on taking bitcoin for Tesla cars, cites climate concerns

Also read: Crypto enthusiast Elon Musk asks Twitter users if Tesla should accept Dogecoin

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