Yerevan (CoinChapter.com) — Traders dumped Bitcoin after billionaire investor Elon Musk announced that his electric vehicle company Tesla has suspended bitcoin payments for its products, ignoring the cryptocurrency’s long-term potential as an anti-inflation asset.
Mr. Musk cited environmental issues as Tesla’s primary concern behind his decision to end Bitcoin payment support. In a tweet published late Wednesday, the founder noted that the cryptocurrency’s mining process remains dependent on fossil fuels that lead to higher carbon commissions. Associating with Bitcoin conflicts with Tesla’s overall goal to reduce pollution with its line of electric vehicles. Hence, the cryptocurrency is a misfit unless miners switch to renewable methods.
Speculators took the announcement as their cue to dump Bitcoin minutes later, insomuch that the BTC/USD exchange crashed to a sessional low of roughly $46,000. The panic-selling round met with an equally aggressive buying response as the pair reversed course to reclaim $50,000. Nonetheless, the $13,000-price crash shook the market’s short-term bias that had envisioned an extended breakout move towards $70,000 for Bitcoin.
Anticipations for a bullish bitcoin were higher at the beginning of this week due to inflation data. Data released on Wednesday showed that the US consumer price index surged at a rate of 4.2 percent year-on-year, which is more than what economists had anticipated. The US stock market plunged on the news.
The likelihood of sustained higher inflation could sap investors’ appetite for stock and bonds by lowering the real returns from dividends and fixed-interest payments. Bitcoin bulls present it as the opportunity for the cryptocurrency to attract cash from fundamentally beaten-down alternatives.
A limited number of corporates houses has reflected fears of inflation by choosing Bitcoin as a hedge. Tesla, the very same company that rejected Bitcoin as a payment method, still holds about $1.3 billion in the cryptocurrency as its insurance against inflation. MicroStrategy, Square, Ruffer Investments, and many others also hold BTC in their reserves, citing inflation — and the potential US dollar devaluation that may follow after that — as their primary concern.
But a higher inflation data did little on Wednesday to support Bitcoin. Traders remained more concerned about what a billionaire chief executive treats the flagship cryptocurrency. The panic ensued, and prices fell, prompting mainstream media to equate Bitcoin’s drop with that in the stock and commodity markets.
Joe Weisenthal, the executive editor of news for Bloomberg Digital, questioned Bitcoin for not behaving as an inflationary hedge in a tweet published shortly before Mr. Musk’s announcement on Wednesday. He said:
“Gold, Bitcoin, and speculative tech stocks all have one thing in common. None of them produce cash flow today. And when you can make a fortune right now selling gasoline or lumber or hamburgers or pool cleaning supplies, why would you want something not producing any cash?”
Concerns that the current inflation rate might led to tapering also kept a lid on Bitcoin’s upside attempts. The Federal Reserve has earlier ensured that it would seek to maintain inflation rate above 2 percent. More information on their take following the latest CPI report could come as their officials Thomas Barkin, Christopher Waller and James Bullard speak at several events.
Bitcoin Advocates Undoing Damage
Until then, Bitcoin holds its long-term bullish bias. Traders earlier this morning bought the $46,000-level and analysts anticipate that it would pare its losses in the sessions ahead. Some of them are even trying to put water on the Musk’s fire-like attack on the Bitcoin market.
Galaxy Digital CEO Mike Novogratz commented that Mr. Musk “cares about the environment and he is using his considerable influence to push BTC mining towards a greener future,” adding that his short-term concerns should not stop investors from buying the cryptocurrency.
Anthony Pompliano, a celebrated Bitcoin advocate, meanwhile told CNBC said that Mr. Musk has not sold a majority of his Bitcoin, hinting that mainstream media is unfairly covering the cryptocurrency in bad light even when the US dollar and the entire banking system do more harm to environment.
“Better drop dollars then because the dollar is way worse for the environment than bitcoin is,” he noted.