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It was only 6 weeks ago that Bitcoin (CRYPTO: BTC) was making a new all-time high. Yep, in mid-April, Bitcoin was comfortably above US$60,000 a coin and was exploring territory as high as US$63,000. How a difference of 6 weeks matters in the cryptocurrency world.
Today, Bitcoin is worth almost half of what it was on 15 April, going for US$34,408 at the time of writing. That’s close to a 44% slide in value for the largest cryptocurrency by market capitalisation.
It’s not just Bitcoin either. Just 2 weeks ago, Ethereum (CRYPTO: ETH) was at its own all-time high, reaching as far as US$4,180 a coin on 11 May. Today, those same coins are worth US$2,294, a slide of 43%.
Litecoin (CRYPTO: LTC), a cryptocurrency that is designed to function as a Bitcoin alternative, has lost 55% since 9 May. We see a similar pricing move in the finance-based coin Ripple (CRYPTO: XRP). Ripple was sitting at US$1.70 per token on 18 May. Today, it’s at 89.8 US cents, a drop of almost 50%
And the famous Dogecoin (CRYPTO: DOGE) is currently trading for 29.7 US cents per coin after climbing as high as 72 cents earlier this month. That’s close to a 60% drop.
So all of these moves represent a massive outflow of capital from the cryptocurrency space. That’s what has to be behind a halving of the value of most cryptos in just a few weeks.
Bitcoin and Elon Musk: A complicated relationship
But the origins of this ‘crypto crash’ seem to stem from just one man. That man would be Elon Musk, the CEO of electric vehicle and battery manufacturer Tesla Inc (NASDAQ: TSLA).
Musk was actually one of cryptos biggest cheerleaders over the past few months. His tweets on Bitcoin and Dogecoin in particular resulted in huge surges of interest in the cryptocurrency space. And it is widely acknowledged that Tesla’s announcement that it would accept Bitcoin as a payment method for its products back in March really lit the fuse for 2021’s crypto rally.
But the man who started the fire also has helped extinguish it. On 13 May, Musk announced that Tesla would be reversing its previous announcement and would no longer accept Bitcoin as a payment method.
Musk cited the often environmentally unfriendly methods that Bitcoin miners generate coins as his reason. Mining crypto coins typically uses large amounts of electricity. And a lot of this electricity is generated through the use of fossil fuels. At least that’s what Musk told his followers was behind his thinking.
Since it was around that date that most of the cryptocurrencies named above peaked, we can pretty safely say that it sparked the sell-off.
So what’s next for Bitcoin and the other cryptocurrencies? Well, who knows. Some commentators out there, including ARK Invest’s Cathie Wood, continue to make bull cases for owning Bitcoin and other cryptos But with an asset class this volatile, making predictions is a dangerous game.