Bitcoin has rocketed to popularity in recent years and is rarely absent from news headlines. Millions of Brits now hold cryptocurrencies like Bitcoin after it won several big-name supporters, including the forward-thinking Tesla founder Elon Musk. Prices had soared and tempted many new traders to invest – but its most recent crash highlights the coin’s ongoing volatility.
A change of heart
The public support from Musk had pushed the price of bitcoin up to an all-time high of $63,000 in April of this year, with Tesla investing over $1.5 billion and registering over $100 million in bitcoin vehicle sales. Yet Musk changed his stance in recent weeks and suspended bitcoin vehicle purchases due to the heavy use of fossil fuels for mining.
Musk’s statements over Twitter caused the value of bitcoin to crash minutes later, eventually reaching a low of around $30,000 before recovering to the mid forty thousands.
His comments initially suggested that Tesla planned to dump its bitcoin holdings, though Musk has since clarified that the company will continue to hold it until mining becomes more sustainable.
Edward Moya, Senior Analyst at Oanda, said on the matter:
‘The next several days will turn to many macro defences in supporting Bitcoin’s ESG problem and regulatory future. Claims are being made that China’s percentage of Bitcoin mined is anywhere from 40% to as much 50% (Ark’s Wood) in renewables.’
Many analysts have accused Musk of manipulating the market for his own profit. Given the enormous weight of his comments on the topic, which Musk is likely to be aware of, some believe he is playing irresponsible games with a burgeoning technology.
This view is stoked further by Musk’s public support of dogecoin, a joke internet meme-based currency that has gained ground as a result. He tweeted in previous days that a planned upgrade for dogecoin will make it better than bitcoin ‘hands down’.
Musk also hit back at critics by calling bitcoin ‘highly centralised’ and reemphasising his superior financial knowhow.
Should you buy the dip?
The recent crash is the lowest bitcoin’s value has fallen in a relatively long time, leading many bullish traders to buy the dip in anticipation of bitcoin’s price rising again in the future.
‘Buying the dip’ is hard to do given that you’ll never know its lowest point – but those who see long-term value in bitcoin stand to profit by investing now. The coin has gone mainstream enough in terms of public and institutional backing for many to think that it will stick around.
Others fear the bursting of a bubble however as bitcoin and other cryptocurrencies fall to more realistic prices. Whichever camp you’re in right now, make sure to do your research and due diligence before making any decisions.