There is no question as to how volatile the price of Bitcoin (BTC) can be. This has been clearly evident in the first few months of 2021 when it breached its all-time high and then dropping to the lowest in the year after several announcements made by major corporations. The name mentioned here is Tesla.
How Tesla played BTC out?
In a U-turn move, Tesla literally caused hundreds of billions of dollars to disappear. Tesla CEO Elon Musk had in May 2021 announced that the company has suspended the use of Bitcoin for car purchases. This caused the price of BTC to plummet. Within 3 hours of the announcement, the value of the cryptocurrency market dropped to about US$350 billion. It was at US$2.43 trillion when the news came out.
Volatility at its worst
Musk tweeted the announcement and that caused some US$290 billion worth of BTC wiped out in the process. At that point, the price of BTC dropped more than 10% to somewhere around US$48,000. This would be the first time it fell below US$50,00 since 24 April 2021. That said, BTC’s price still maintained its current threshold at more than 400% in the last 1 year.
Tesla first announced that it was purchasing some US$1.5 billion worth of Bitcoin and that it would be accepting the cryptocurrency but 2 months later, the tables have turned. Musk claimed that the decision was made over environmental concerns because Bitcoin mining and transactions require high utilization of fossil fuels. The takeaway from this is:
- To date, Bitcoin mining has the highest consumption of energy as compared to the other cryptocurrencies. It could even consume more energy than a whole country.
- Musk has always been a strong advocate of cryptocurrencies including BTC and the meme-related dogecoin. He has been involved in driving the prices of such currencies.
What is next in the pipeline then?
The demand for BTC will not deteriorate from 2021 onwards. Small ripples in the market will cause the price to change and more traders are now taking note. But that also means that regulators are going to take proactive actions too. This includes New York which is looking at a bill that will stop mining for Bitcoin for 3 years. This is to look into greenhouse gas emission caused by such activities and until the impact can be assessed, there will be no bitcoin mining allowed and that could impact the economy quite severely.