Markets have gyrated to Musk tweets for months since his
interest in dogecoin sparked a hundred-fold rally in the previously ignored
token's value this year, while Tesla's $1.5 billion bitcoin purchase helped it
break past $50,000 in February.
Yet in an equally surprising U-turn he dented the world's
biggest cryptocurrency this week after announcing Tesla stopped accepting
bitcoin in payment owing to environmental concerns, making investors uneasy
about Musk's influence on crypto prices.
Bitcoin is down nearly 15% this week at $49,804.
Dogecoin is down about a third since last Friday, having
tumbled after Musk referred to it as a "hustle" on Saturday Night
Live. It then jumped 20% after his latest comments that he was involved in work
to improve its efficiency.
"Working with Doge devs to improve system transaction efficiency. Potentially promising," Musk said on Twitter, vaulting dogecoin from about $0.43 to $0.52 on the Binance exchange.
As always pic.twitter.com/gtFmtokzEZ
— Elon Musk (@elonmusk) May 13, 2021
It was unclear if Musk was referring to efficiency in terms
of energy use, ease of use or suitability as a currency, said Mark
Humphery-Jenner, an associate professor of finance at the University of New
South Wales business school in Sydney.
Dogecoin consumes 0.12 kilowatt hours of electricity per
transaction compared with 707 for bitcoin, according to data center provider
TRG, but it is near impossible to use it to buy anything.
Speculative Frenzy
Almost worthless in late 2020, dogecoin is the latest
darling of a frenzy gripping crypto markets that began last year as
institutional investors announced big bitcoin purchases.
It has surged to become the fourth-largest cryptocurrency by
market cap, according to CoinMarketCap.com. Second-biggest cryptocurrency ether
has also soared more than 400% this year. It last sat at $3,865, steady for the
week so far.
The huge moves have begun to attract regulatory scrutiny,
and a Bloomberg report on Thursday which said major exchange Binance was under
Justice Department investigation in the US added to some of the price pressure
on cryptos this week.
Musk's tweets and the market's response may also invite
attention, said Edward Moya, an analyst at brokarage OANDA. "Tesla is
drawing tremendous scrutiny for Musk's cheerleading of Bitcoin," he said.
"If Tesla unveils a bet on dogecoin, regulators may have their eyes on
Musk."
Others, however, say the market might be more comparable to
an old fashioned bubble.
"Dogecoin remains a lesson in greater fool
theory," said David Kimberley, analyst at investing app Freetrade, which posits
that buying overpriced assets can be profitable, so long as there is a
"greater fool" to buy them at ever higher prices. "It's being
pumped by people that want to get rich quick (and Elon Musk)," he said.
0 comments:
Post a Comment