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Bitcoin drops to 3-month low in wild trading after Musk tweets

  • Musk tweets that Tesla has not sold bitcoin
  • Ether and dogecoin dive also
  • Bitcoin, dogecoin and ether all up year to date.
Published May 17, 2021
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NEW YORK/LONDON: Bitcoin fell to a three-month low on Monday in a volatile session that saw investors selling and buying the digital currency after Tesla boss Elon Musk tweeted about the carmaker's bitcoin holdings.

Bitcoin fell to as low as $42,185, its lowest since Feb. 8, and was last down 6.2% at $43,564.

In his latest tweet, Musk said "Tesla has not sold any bitcoin". A day earlier, he suggested Tesla may have done so, and last week, Musk said Tesla would stop taking bitcoin as payment due to environmental concerns about energy use to process transactions.

Musk has boosted crypto markets with his enthusiasm for the asset class, but has lately roiled trade by appearing to cool on bitcoin in favor of its one-time parody, dogecoin. While bitcoin, dogecoin and ether still enjoy strong gains year to date, their latest gyrations are beginning to spook even steeled traders.

"At this rate of fall, bitcoin is likely to see support at $40,000 if the selling continues, and surviving this fundamental onslaught can set a new run that will create a new all-time high of $70,000 in the mid-to long term," said Alexander Vasiliev, co-founder and chief commercial officer of global payment network Mercuryo.

"The market has proven it can react to Elon's tweets and should his comments continue to stream in unbridled, (bitcoin's)price may be kept below $50,000 for much longer," he added.

Ether, linked to the ethereum blockhain, fell to as low as $3,123.94, and last traded down 8.3% at $3,291. Dogecoin fell 6% to US$0.48, according to crypto data tracker CoinGecko.com.

Tesla disclosed in February that it had bought $1.5 billion worth of bitcoin in the first quarter. At the end of April, Musk said the company sold 10% of its holdings for liquidity purposes.

Bitcoin, designed as a payment tool, is little used for commerce in major economies, hampered by high volatility and relatively costly transactions.

The most popular digital currency is now down a third from its record high in mid-April and JPMorgan's crunching of fund flow data shows investors exiting positions in recent weeks.

An unverified Twitter account called @CryptoWhale, said: "Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their #Bitcoin holdings. With the amount of hate @elonmusk is getting, I wouldn't blame him..."

In response, Musk wrote: "Indeed."

It was not clear whether he was confirming sales or whether he referred only to the fact that he had faced criticism.

Bitcoin has dropped by almost a quarter since Musk's reversal on Tesla taking it as payment. Dogecoin has yet to fully recover from Musk describing it as a "hustle", although it did rise last week when Musk said he was working to improve its efficiency.

For an asset class that has surged this year, with dogecoin up about a hundredfold, ether up more than fourfold and bitcoin gaining 45%, some are beginning to call time on the wild ride.

"Why would I want to buy bitcoin right now - even if I'm bullish - until the liquidation is over and you see some consolidation in price?" said Chris Weston of brokerage Pepperstone in Melbourne.

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