Recently, Bitcoin, the “rich and handsome” in the currency circle, has collapsed, but other altcoins have gained momentum. What triggered this fluctuation was the uncertain noise of the big dealers, and the consequence was that the Xiaosan encountered a barbaric harvest.
The absurd “call order” game
On May 16, Dogecoin moved higher in the short-term and returned to above 0.54 USD/coin. Tesla founder Elon Musk said in his social platform that under ideal circumstances, Dogecoin can speed up block time by 10 times, increase block size by 10 times, and reduce fees by 100 times. So you can win easily.
Other virtual currencies experienced the decline of the previous few days and began to pull back. Ethereum continued to rise, and the intraday gain expanded to 5%; Bitcoin rose by more than 3% in the day, returning to above 48,000 US dollars per coin.
Before that, Musk was a staunch “cargo carrier” of Bitcoin and Dogecoin, known as the “leader of the currency circle”, and had a large group of “believers” behind him—following his remarks, buying or selling frantically .
On March 23 this year (US time), Musk said that it is now possible to buy Tesla with Bitcoin; the Bitcoin paid to Tesla will remain as Bitcoin instead of being converted into legal tender. Bitcoin rose in response. As of 19:00 on March 24th, Beijing time, the price of a Bitcoin was $5,6388.7, which was a surge of more than 1,380% from the lowest point of $3,800 in the epidemic in March last year. In March, Bitcoin hit a record high of $61,468.
But just last week, Musk suddenly turned his face and announced on social media, “Tesla has ordered the suspension of Bitcoin car purchases. We are worried that Bitcoin mining and trading will lead to a rapid increase in the consumption of fossil fuels, especially coal. It is the worst of all fossil fuel emissions.” He also said that Dogecoin is a scam.
This instantly brought most digital currencies, including Bitcoin and Dogecoin, to a rapid decline. Bitcoin fell sharply by $10,000 at one time. As of 11:43 on May 16th, Beijing time, Bitcoin was still below US$50,000, quoted at US$47,896.
However, the next day he once again expressed his favor for Dogecoin, saying that he was cooperating with its developers to improve transaction efficiency, and Dogecoin rebounded sharply. As of 13:00 on May 16th, Beijing time, it has soared to US$0.53 from the lowest point near US$0.38 after the crash in early May.
For ordinary investment novices, Bitcoin is already a “rich and handsome” that can’t be climbed high, and it is difficult to see a surge of thousands of times. If Bitcoin rises by 10 times, this means that the market value will reach more than 10 trillion U.S. dollars, the US GDP will total more than 20 trillion U.S. dollars, and the entire U.S. stock market will be valued at more than 40 trillion U.S. dollars. Therefore, Dogecoin has become the next sustenance. Recently, many investors have sold bitcoins, and the altcoin Dogecoin is also a popular target for investors who exchanged into the “second in the currency circle” Ethereum.
The initial trading price of Dogecoin was US$0.000559. In the past few years, the trading price of Dogecoin has been below US$0.001 for a long time. Before 2021, the highest price of Dogecoin was less than $0.02, but under the frenzied speculation, the price of Dogecoin once broke through $0.7, and the highest cumulative increase this year has exceeded 12000%.
“The left hand sells Bitcoin at a high position and the right hand buys Dogecoin-so young people who get rich are everywhere, but the violent fluctuations have also made many believers lose their money.” A cryptocurrency exchange practitioner told China Business News. The reporter said.
From the perspective of industry insiders, if Bitcoin has its consensus value and deflationary properties, then Dogecoin is a full “altcoin”. Even the founder of Dogecoin stated that it originally appeared as a spoof form of mocking virtual currency, “this is a joke that will definitely disappear.”
What is even more absurd is that a Shiba coin (SHIB) used to “strangle” Dogecoin has recently been released.
“Cargo carriers” are calling for rain in the market, and they often have a certain purpose, but the result is that “leeks” are harvested savagely. Many people in the industry have called for the rectification and regulation of relevant departments in this field.
Big bookmaker’s little abacus
This wave of Musk’s operations is indeed incomprehensible. He “blows up” Bitcoin for a while, and then dismisses it for too much energy consumption. Behind this may be another set of calculations.
Musk, who was shorted by Wall Street capital predators in the early years, was on the verge of collapse, but in the past two years he has mastered the dominance of alternative finance in the currency circle. It can be said that he tasted the sweetness of financing on Bitcoin.
In the first quarter of this year, Tesla created the highest quarterly profit in history-$4.4 billion. Among them, the sale of Bitcoin brought a profit of 100 million U.S. dollars, but the sale of a car lost more than 100 million. The remaining profit came from the sale of carbon credits.
Tesla’s financial report shows that as of March 31, 2020, the fair market value of the company’s bitcoin holdings is 2.48 billion U.S. dollars, which means that if the company cashes out the digital currency, it is expected to make a profit of about 1 billion U.S. dollars. On March 31, the Bitcoin price was reported at 59,000 U.S. dollars, and 1 billion U.S. dollars of the market value of 2.48 billion U.S. dollars was profitable, indicating that the average cost of Tesla’s Bitcoin holdings was only less than 25,000 U.S. dollars per unit. In other words, before Musk sang more bitcoins, he had already “ambushed” him.
Musk, who tasted the sweetness, turned his gaze to the little-known Dogecoin. After Dogecoin has risen more than 200 times in a year, Musk announced that it will use the money raised by Dogecoin to launch a moon satellite next year.
But why start to crack down on Bitcoin and Dogecoin at the moment of high light?
There is a view that when financing is needed, the market is in a bull market and it is easiest to get financing; when financing is not needed temporarily, it is best to be in a bear market, otherwise the money in the market will be cut away by speculators. At the same time, sing a lot of cryptocurrency market on one side, will be watched by the supervision-after Musk sang Dogecoin, he was supervised to “drink tea”, and once stopped Twitter. So now Musk is also beginning to converge.
The most important thing is that at this stage of development, Musk needs to pay attention to the views of large institutional investors. The behavior of speculating on Bitcoin has made many institutions disgusted. At the same time, in the context of carbon neutrality, global institutions are “emissions reduction” for investment portfolios. The reason why Tesla has a high ESG rating is because of the “clean technology opportunity”. Perhaps Musk does not want Bitcoin to hold back.
Matt Weller, head of global research at Jiasheng Group, told reporters that traders instead believe that this move (refusing to accept Bitcoin payments) is positive from Tesla’s point of view.
Goldman Sachs recently stated that although Bitcoin benefits from greater liquidity, due to its high energy consumption, lack of actual use and weaker ESG scores, it is possible that another better-designed cryptocurrency will catch up in the future.
Tightening liquidity, beware of a major crash
The skyrocketing and falling of the currency circle has always been the norm, but at this stage when the liquidity margin is tightening, the above-mentioned “harvest” may come even more violently.
Since October 2020, Bitcoin has risen from $10,000 to nearly $50,000. William, the chief researcher of the Ouyi Research Institute, told reporters that Bitcoin is a high-risk emerging asset, with large daily price fluctuations, and rapid rises and falls often occur. From an empirical point of view, the retracement that occurs in the Bitcoin bull market is about 33% to 66% of the advancement of the basic trend direction, and the duration is one or several weeks.
Even though Bitcoin has entered a bull market since January 2021, it has risen nearly twice, but it often plummets. Among them, there are at least 7 days where the largest daily decline exceeds $5,000, and two consecutive days on February 22 and 23. The biggest drop in the day has exceeded 10,000 US dollars. The biggest drop of Bitcoin this time was only $9,000.
What everyone is more worried about is that under the high inflation data, the United States may be about to face a tightening of liquidity, and the currency circle that was once piled up by liquidity will naturally shrink.
The US inflation data released on the evening of May 12 exceeded expectations. The CPI rose 4.2% year-on-year in April, setting a new high since September 2008. PPI increased by 6.2% year-on-year, setting a record high since the data began to be tracked in 2010.
Fed Vice Chairman Clarida was surprised by the higher-than-expected inflation data and said that if price pressures are not temporary, the Fed will take action.
When the overall liquidity is expected to tighten, the currency circle “crash” is likely to come.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.