Bitcoin just went through potentially one of its worst days since March 2020. With a 50% correction in the weekly chart, the price has retraced to levels last seen in January 2021. But just as quickly as it fell, BTC’s price bounces back from a major psychological mark at $30,000.
At the time of writing, the first cryptocurrency by market cap stands at $37,537 with a 9% loss in the daily chart and a 30% loss in the monthly chart.
The crypto industry has been hit with FUD mostly via tweets from Tesla’s CEO, Elon Musk. Some believe that the rollback on Tesla’s policy to accept Bitcoin as payment for their products was the trigger that set off the bloody price action seen this week.
Musk’s statements were a source of controversy. When BTC’s price reached critical support at $45,000 and facing high levels of selling pressure, the entrepreneur suggested that Tesla could have sold all the BTC bought back in February estimated at $1.5 billion.
Panic struck as Musk continued the offense. He called Bitcoin a centralized network “controlled” by mining companies in China further pushing the price below 3 critical support.
Bitcoin is actually highly centralized, with supermajority controlled by handful of big mining (aka hashing) companies.
A single coal mine in Xinjiang flooded, almost killing miners, and Bitcoin hash rate dropped 35%. Sound “decentralized” to you?https://t.co/Oom8yzGRNQ
— Elon Musk (@elonmusk) May 16, 2021
However, as the price dipped, Musk confirmed that his company will hold its BTC and claimed they have diamond hands. The price responded positively but founds new resistance at $40,000. This level could become an important area that needs to be reclaimed by the bulls to continue the bounce back to previous all-time highs.
Tesla has 💎 🙌
— Elon Musk (@elonmusk) May 19, 2021
Why Elon Musk Changed His Stance On Bitcoin
There has been lots of speculation on why Tesla’s CEO suddenly changed his position on BTC. Senior ETF Analyst for Bloomberg Intelligence Eric Balchunas shared parts of an interview given by Catherine Wood, ARK Invest CEO and founder, on the potential reasons that triggered Musk’s statements. Wood said:
I believe what happened is after he took a position in bitcoin he got pushback from inst shareholders like BlackRock. You’ve got Larry Fink beating the drum on climate change. I don’t think he expected that. But I think he’ll come back to the mix.
Wood believes in Bitcoin’s capacity to incentivized greener forms of energy. A month ago, Ark Invest release a Whitepaper with Square called “The Bitcoin Clean Energy Initiative”. The document describes a model where BTC mining is a key piece to absorb the excess of energy produced in a system powered by renewable energy.
When the Whitepaper was published, Square’s CEO and bitcoiner Jack Dorsey said that can drive the adoption of clean energy. At that time, Elon Musk replied “True”. Therefore, Wood’s speculation seems valid. She added the following:
Once institutions understand how renewables are being incorporated into the bitcoin mining ecosystem and that bitcoin might accelarate the adoption of solar they will invest more.
Tesla’s next earnings call will surely reveal more details and possibly could indicate if the company double down or back away from its BTC bet.
— Elon Musk (@elonmusk) April 22, 2021