Bitcoin is down after skepticism by Musk
Tesla CEO hinted that prices were excessive
Elon Musk’s embrace of Bitcoin earlier this month rocketed the cryptocurrency almost 50% higher to more than $58,000. His cold shoulder this weekend whipsawed the largest digital asset.
Bitcoin was down about 6% after plunging as much as 17% earlier Monday. The digital asset briefly drifted below $50,000, giving up more than $8,000 in a matter of hours after the world’s richest man tweeted his concern that the price had risen too high too quickly.
“Elon and his fleet have incredible power over market prices,” said Mati Greenspan, founder of Quantum Economics, comparing Musk’s influence over the digital asset’s price moves to Warren Buffett.
Longtime Bitcoin skeptic and now Treasury Secretary Janet Yellen also offered a stark warning, saying at a New York Times conference on Monday that the token is an “extremely inefficient way of conducting transactions.”
Even other billionaires are weighing in on Musk’s comments. Microsoft Corp. co-founder Bill Gates said in an interview with Bloomberg Television’s Emily Chang that he isn’t a fan of Bitcoin, either for environmental reasons — it uses a lot of energy — or for individual investors not named Elon Musk.
“Elon has tons of money and he’s very sophisticated so I don’t worry that his Bitcoin will sort of randomly go up or down,” Gates said.
“I do think people get bought into these manias who may not have as much money to spare, so I’m not bullish on Bitcoin, and my general thought would be that if you have less money than Elon you should probably watch out.”
It’s widely believed that volatile weekend swings are driven by individuals trading the cryptocurrency at home. So it’s also possible that prices fell on Monday as institutional crypto traders, who follow normal business hours, responded to Musk’s Saturday tweet that Bitcoin and Ether prices “seem high.”
The world’s largest cryptocurrency had been on a tear this month, propelled by purchases from Musk’s Tesla Inc. and institutional investors who say Bitcoin is an attractive alternative to gold and the dollar. Skeptics have warned that the rally is a bubble born of massive government stimulus and excess liquidity from central banks.
In February alone, Bitcoin was up more than 60%, prompting commentary that the run-up is excessive. The digital token hit a new all-time high on Sunday and
came close to surpassing $59,000. It dropped 6.2% to $53,765 Monday
So-called altcoins fell in tandem. Ether, the second largest cryptocurrency by market value, plunged as much as 19% before paring losses to about 13%. The Bloomberg Galaxy Crypto Index, which measures the performance of the largest digital assets, fell as much as 18%.
Meanwhile, JPMorgan Chase & Co. strategists have warned about Bitcoin’s declining liquidity. Strategist Nikolaos Panigirtzoglou wrote in a note on Friday that liquidity for the digital coin was lower than that for the S&P 500 Index and gold, meaning “even small flows can have a large price impact,” he wrote. “It should go without saying that new investors to Bitcoin should be prepared for major volatility and for prices to drop suddenly and as sharply as they have risen,” according to Neil Wilson, chief analyst at Markets.com.