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The cryptocurrency market saw an unusual convergence of bearish fundamentals on Wednesday, May 19, triggering a massive plunge across all digital coins.
Later in the day, however, crypto analysts were left scratching their heads as Bitcoin prices made an unprecedented rebound from US$ 30,000 to US$ 40,000 in the span of two hours.
All of this happened as Tesla boss Elon Musk carried on his tweeting spree — or, as crypto purists call it, “manipulation”.
On Twitter, the Tesla (TSLA:US, NASDAQ:TSLA) and SpaceX founder had put up posts like, “Tesla has diamond” and “credit to our master of coin”. Some experts believe that Mr Musk’s comments are having significant impact on crypto prices, with a few going as far as claiming that he is “irresponsibly manipulating” the market.
Meanwhile, the Chinese government maintained its status quo stance on the crypto market, banning the use of digital currencies as payments, which also fueled the crypto market bears.
What Is Causing Crypto Market’s Rollercoaster Ride?
Tesla’s decision to suspend Bitcoin as a payment mode earlier this month had already been fueling investors’ fear, uncertainty and doubt (FUD). However, Elon Musk’s alleged manipulation is not the only possible catalyst fueling the rollercoaster fluctuation in the crypto market.
Social media-based retail investors and crypto enthusiasts have been calling for “buy the dip”, which turned into the top trend on Reddit and Twitter on Wednesday.
Also, earlier this week, Bitcoin chartists released bearish technical and predicted a downtrend to a US$ 30,000-mark for the coin.
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The crypto community alleges that Tesla, which recently reported a Bitcoin investment of US$ 1.5 billion, had purchased bitcoins at lower rates in the first quarter of 2021. The electric vehicle (EV) manufacturer has also been accused of deciding to accept payments in bitcoins initially only to “pump up” its prices.
The company reported US$ 101 million in profit from its Bitcoin investment in the first quarter of 2021. As a result, the Tesla chief has been called out for taking “a U-turn” on Bitcoin after “capitalizing” on the largest cryptocurrency.
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Crypto purists have been raging a Twitter war against Mr Musk in the light of these developments, asking him to “stay away” from the crypto market.
On top of that, the crypto community has also launched a new coin named $STOPELON as a reaction to his “manipulation” of the cryptocurrency market via his Twitter handle, as per the Stop Elon website.
Bullish Institutional Investors
In contrast to sour sentiments, Wall Street’s institutional investors and digital fund managers still seem to have a bullish stance on virtual assets. Ark Investment’s Cathie Wood believes that Bitcoin will hit US$500,000 apiece.
While supporting her prediction, Ms Wood stated that Tesla’s environmental worries on bitcoin mining could be resolved by adopting solar energy.
Optimistic analysts have called this dip a discount, which could allow new investors to buy crypto coins at lowered prices.
The New York-based digital asset firm’s CEO Mike Novogratz foresees the support level to this liquidation event between US$ 36,000 per BTC and US$ 38,000 per BTC.
Market Crash & Crypto Enthusiasts
Enthusiasm over cryptocurrency has simmered down in the last two weeks, triggered by the bear market amid environmental concerns. This lowered enthusiasm could be one of the catalysts of the selloff as well.
However, crypto enthusiasts have been taking the ‘buy the dip’ call seriously and adding more digital tokens to their wallets.
The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.
