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Bitcoin

Did a Tweet From Elon Musk Cause the Bitcoin Crash? This Is What We Know

The price of the cryptocurrency fell almost 10% after the Tesla mogul hinted on Twitter that Bitcoin is overvalued.
Image credit: Getty Images vía BI
Entrepreneur Staff

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

A couple of weeks ago, tycoon Elon Musk invested $ 1.5 billion in Bitcoin through his company Tesla . The transaction raised the market value above one trillion dollars and the cryptocurrency reached a price above $ 58,000 . However, despite the gains that the purchase has brought him, the CEO of SpaceX hinted that perhaps Bitcoin is overvalued.

Since Saturday, February 21, Bitcoin (BTC) began to show peaks that pointed to the upside. Tesla's investment, added to those of Mastercard and BNY Mellon , caused its market value to exceed $ 1 trillion for the first time that day.

By Sunday night the 22nd, the cryptocurrency surpassed $ 58,000 per unit. That is, almost double the $ 29,000 it cost on January 27, its lowest price so far this year.

 

 

During the first hours of this Monday, February 22, Bitcoin plummeted below $ 53,000 , representing a drop of between 8 and 10% .

Ethereum , the second largest digital currency by market capitalization, set a record of more than $ 2,000 per unit on Saturday. However, this Monday it also fell to around $ 1,700. Still, you can see significant growth, as Ethereum started the year trading at just $ 730.

 

Elon Musk joins the Bitcoin fever

Earlier this month, Tesla announced a $ 1.5 billion investment in Bitcoin. According to experts, Musk acquired 43,000 bitcoins during various operations in January. The median price last month was nearly $ 35,000. In addition, the company declared itself ready to accept cryptocurrency as a means of payment for its electric cars.

With this bet, Tesla made a profit close to a billion dollars , says Dan Ives, specialist at Wedbush Securities. "To put this in perspective, Tesla is on a path to make more of its investments in Bitcoin than the proceeds from the sale of its electric vehicles in all of 2020," Ives wrote in a note this Saturday.

 

What does Elon Musk have to do with the Bitcoin crash?

In the midst of Bitcoin's ups and downs, last Friday a user rebuked Musk for his stance on the cryptocurrency. Economist and market strategist Peter Schiff recalled a comment the Tesla CEO made regarding BTC last December.

"According to Elon Musk 'Bitcoin is almost as much of a hoax as fiat money.' So Musk considers both Bitcoin and fiat money to be bullshit. I agree, I just think that Bitcoin, which is a digital fiat currency, is even more nonsense than the paper fiat currency issued by central banks. Gold is not silly. It's real money and better than both! " the digital money skeptic tweeted.

It should be remembered that fiat money or inorganic money is one that is not based on the value of precious metals. Instead, it is supported by the general belief that it has value, that is, the trust of a society. For example, the Dollar , the British Pound , the Euro and the Yen are fiat money.

Hours later, the 49-year-old tycoon responded bluntly:

“An email that says you have gold is not the same as having gold. You could also have cryptocurrencies. Money is just a piece of information that allows us to avoid the inconvenience of bartering. That data, like all data, is subject to latency and error. The system will evolve toward that which minimizes both , ”Musk explained.

 

 

Next, the founder of SpaceX published the tweet that everyone associates with the fall of Bitcoin: "That said, BTC and ETH (bitcoin and ethereum) seem to be high."

 

 

Many attribute the depreciation of Bitcoin to Musk's tweet , as the temporal proximity between the two events could give the feeling of cause and effect. However, Musk's statement came two days before the cryptocurrency reached its all-time high. That is, even after the businessman hinted that perhaps BTC is overvalued , its price continued to rise.

On the other hand, the Bitcoin crash occurred until this Monday morning, which does not square with the immediate effects that Elon Musk's tweets have when it comes to electronic currencies. It is enough to remember the times that the value of the Dogecoin has increased just by mentioning it on your social network. Therefore, it would be very risky to say that the businessman caused the cryptocurrency to fall, although it cannot be completely ruled out either.