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How Did Elon Musk impact Bitcoin?

How did Elon Musk impact Bitcoin?

August 25, 2021 | 

575 Views | 

Jesus Guzman | 

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Elon Musk has become the biggest influencer of Bitcoin and other cryptocurrencies. In the past, he has demonstrated that his tweets and comments regarding cryptocurrencies can dramatically affect the prices of these assets.

A positive tweet on Bitcoin from the SpaceX CEO can lead to a sharp increase in the price of the currency, and vice versa also applies.

Why Elon Musk Suddenly Fallen Out with Bitcoin

In 2020, Elon Musk embraced Bitcoin and other cryptocurrencies, and this sentiment drove up the price of the currency. He even declared that buyers could purchase Tesla vehicles using Bitcoin. However, this action was paused in May 2021 because of the excessive energy consumption of Bitcoin.

Since Tesla markets itself as an environmentally-friendly company, dealing in such currencies would seem hypocritical. Therefore, Musk decided that he would accept Bitcoins again once people figure out how to create new Bitcoins without using up so much energy. With this announcement, the price of Bitcoin went down by about 15%.

Although the vehicle manufacturer would no longer accept car purchases made using Bitcoin, Musk confirmed that the company would not be selling any of their cryptocurrencies. According to the tweet, the SpaceX CEO still believes that cryptocurrencies have a promising future and are an excellent invention.

Experts have noted that one Bitcoin transaction takes 1544 kWh of energy, and this is about the same amount of electricity used in 53 days by an average household. In the USA, such a transaction would result in a $200 energy bill. An analyst from Cambridge University stated that the mining of Bitcoin used more energy than the country of Argentina.

Elon Musk affecting bitcoin prices pretty bad

Given the high energy consumption of Bitcoin, more fossil fuels are used up all around the world, and this leads to the release of carbon dioxide. This is quickening the damage to the environment, which is why Elon Musk wants to distance himself from the coins.

Most miners base their mining decisions on the cryptocurrencies with the best daily returns, and the environmental impact is rarely considered. However, it is worth noting that access to cheaper sources of renewable energy can influence miners to engage in the activity more often.

For example, Sichuan Province in China has become the second-largest mining region of the world since it has access to cheap hydroelectric power. In rainy seasons, the province even ends up wasting energy since a lot of it is produced.

Elon Musk Sells 10% of Bitcoin Holdings

When Tesla stopped accepting Bitcoin, it clarified that it would not sell its cryptocurrency holdings. However, investors and speculators would later start rumours that the billionaire had sold all his Bitcoins.

This would drive down the price of the currency, and Musk would later clarify that he only sold 10% of his holdings in an effort to test the liquidity of the currency. This seemed to hold the price for a while.

However, he would later tweet an image of heartbreak with the word ‘Bitcoin’ next to it. He also attached a meme about breaking up, and many people took this to mean that he was done with Bitcoin forever.

This led to a 5% drop in the price of the currency. When he eventually clarified that he would accept Bitcoin once the technology becomes environmentally friendly, the price of Bitcoin jumps back by 8%. As demonstrated here, Elon Musk impact on BTC is quite significant.

Elon Musk Impact on Dogecoin

Elon Musk has not just impacted Bitcoin; he has also been tweeting consistently about Dogecoin, a currency that was initially started as a meme. He tweeted so much about the currency that his followers started questioning his intentions.

His response was simply that he liked dogs and memes. At one point, he even changed his Twitter profile to read that he was the CEO of Dogecoin. Needless to say, the price of this currency increased significantly, and at one point, it was among the highest-valued currencies.

The Securities and Exchange Commission (SEC) was forced to investigate Musk because of his constant tweets regarding the cryptocurrency. When this investigation was announced, the price of Dogecoin immediately dropped by 10%. It is worth noting that this drop in price may have emerged as a result of wider market trends. This is because similar currencies seemed to drop by a similar percentage.

Can Elon Musk Have a Long-Term Impact on Bitcoin?

Elon Musk first tweeted about cryptocurrencies in 2014, but he simply stated that the currencies are likely to be a good idea. This would later result in rumours that he was Satoshi Nakamoto, the anonymous founder of Bitcoin. He would have to clarify that he did not know who Satoshi Nakamoto was and that he first received some Bitcoins from a friend a few years prior.

Although he made comments regarding the currency back then, he would only become a committed advocate of cryptocurrencies in 2019. Since then, whenever Elon Musk slams Bitcoin, the price would suffer significant price reductions.

His tweets also raised the price of Bitcoin to its highest ever price. However, most experts agree that his influence is only in the short term. It is highly unlikely that the SpaceX boss has enough influence to drive the prices of cryptocurrencies in the long term.

Will Bitcoin Recover?

Although Elon Musk has helped to lower the price of Bitcoin to a large extent, the currency still has a very high value, especially in comparison to its past prices. Given that he supports the efforts to make the currency greener, we can only expect the prices to go up in the future. Bitcoin still has a lot of potentials, and volatility has always been a characteristic of this asset class.

Currencies like Etherium are already becoming greener by changing the mining process. With this change, the currency hopes to lower its carbon footprint by 99%. By 2022, the new mining system will be put in place to replace the proof of work system.

Not all crypto miners are happy about it, but if it works well, the system might be adapted for Bitcoin and other cryptocurrencies. This will effectively eliminate the environmental issues and put cryptocurrencies back on track.

Conclusion

Elon Musk is among the richest people in the world today, and he has been one of the biggest advocates of cryptocurrencies. His tweets have had a major impact on cryptocurrencies such as Bitcoin and Dogecoin. In 2021, the billionaire would start taking Bitcoin payments for his company’s vehicles, and this action would shoot up the price of the currency significantly.

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COMMENTS (4)

Ortal A  Very interesting read  25 days ago from Israel

0     Reply   

Yosef Eliyahou Az  Very interesting read  26 days ago from Israel

1     Reply   

Yosef Eliyahou Az  Very interesting read  26 days ago from Israel

1     Reply   

Ortal A  Great!  25 days ago from Israel

1    

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