Cryptocurrency update: all aboard the Bitcoin rollercoaster

Strap yourself in and keep all hands and feet inside the ride at all times: Bitcoin is on another wild journey.

Bitcoin spins on Musk’s whims

Alton Towers’ Smiler rollercoaster features 14 inversions making it the ride with the most ups and downs in the world. If Alton Towers needs inspiration for a new ride to rival Smiler’s steely twists and turns it might consider the Elon Musk Bitcoin rollercoaster.

The tweet-happy mogul has been at it again. Last week, he sent BTC for a spin after revealing Tesla will no longer accept payment in Bitcoin. Musk and co. cited concerns over crypto mining’s harmful environmental impact as the reason for the U-turn.

Musk sent BTC prices whipsawing at the end of last week after seemingly agreeing with a tweet advising him a to sell Tesla’s Bitcoin holdings – valued between $1-2.5bn.

Bitcoin subsequently slid below $45,000 for the first time in three months.

Musk has since clarified Tesla’s position.

“To clarify speculation, Tesla has not sold any Bitcoin,” he wrote in reply to a Twitter user pointing out the considerable impact his posts have on Bitcoin prices.

Bitcoin jumped 5% after Musk’s clarification, but at the time of writing, it is still trying to break through $45,000 convincingly.

There’s not really much more to say about Bitcoin. It’s volatile, speculative, and apparently easy to manipulate, as our Chief Markets Analyst Neil Wilson points out.

As Bitcoin falls, so do other tokens. Such are the perils of following the cryptocurrency’s bellwether. ETH, recently soaring to all-time highs, as dropped 9%. Dogecoin, another Musk favourite, is down 5%.

Bitcoin is actually most volatile on the weekends, so maybe this whole situation should not have come as a surprise. On Saturdays and Sundays in 2021, the token’s average price movement is 4.95%.

Crypto liquidations surge in 24 hours

The fallout from the above has caused a surge of liquidations.

According to ByBit data, approximately $2.34bn in total liquidations has taken place over the past 24 hours. Over half of that, $1.26bn, has come from Bitcoin alone.

Cryptocurrency’s total market cap has dropped by $300bn.

While this is still significant, it is not the largest long-position liquidation to hit crypto markets recently. $9bn disappeared shortly after Bitcoin reached its current all-time high on April 17th, 2021.

What the above shows, however, is just how volatile the sector is. While billions have been wiped out, the resulting upswing in price will add more back on to Bitcoin and crypto’s total market valuation. But the short-term losses for Bitcoin holders are proving rather dramatic.

It also goes to show how reactive crypto sellers are to single tweets. It’s probably best to not buy and sell on the whims of a single celebrity investor, but yet Musk’s itchy tweeting finger continues to play havoc with Bitcoin markets.

Asset managers take cautious crypto stance

Institutional fund managers, triggered by the Tesla BTC fiasco, have expressed reservations around cryptocurrencies reports the Financial Times.

Amongst those investment firms advising caution are UBS Wealth Management, Pimco, T Rowe Price, and Glenmede Investment Management.

“Our stance with clients is the 10-foot pole rule: stay away from it,” said Jason Pride, chief investment officer of private wealth at Glenmede. “I don’t think the Fed and other regulators are fans of the current market structure for cryptocurrencies.”

Rob Sharps of T Rowe Price flagged the high level of speculation within the cryptocurrency sector as unsuitable for his clients’ investment strategies. The other major cause for concern is the sheer volatility of cryptocurrency.

This latest wave of cautionary sentiment comes after Bank of England Governor Andrew Bailey last week reaffirmed his stance that cryptocurrencies have no inherent value. Bailey advised investors to buy crypto “only if you’re prepared to lose all your money”.