Earlier this month, Tesla shocked the crypto world when it announced that it would pause on accepting Bitcoin. In a tweet shared by CEO Elon Musk, the company explained that it had made the decision in the wake of realizations over Bitcoin’s energy implications.
Tesla had begun accepting Bitcoin payments back in February. However, when the company made its formal announcement, it claimed that it had invested $1.5 billion in Bitcoin as a speculative investment as it hoped to diversify its portfolio and maximize its returns. At the same time, Bitcoin-owning customers would be able to use the asset to make payments.
Now, Tesla is singing a different tune. While the company confirmed that its Bitcoin investment remains, it just won’t accept payments in the asset anymore. Bitcoin mining and transaction processing are notorious for being energy-dependent. So while Tesla believes that the asset has a bright future, it claims that this shouldn’t necessarily come at the expense of the environment.
Tesla Sends Bitcoin Crashing
Whether wittingly or not, Tesla’s tweet began a wave of market dumps that has left the crypto market in tatters. A massive selloff that came following the company’s tweet, with many seeing it as a sign that Tesla had closed its Bitcoin position. Despite the fact that Musk clarified Tesla’s position earlier, it wasn’t enough. Panic sellers began moving large numbers of the asset, and futures traders marked its price down as well.
What followed it was a market wipeout like none we’ve seen in a while. Bitcoin might not be leading the way, but it remains the face of the crash since it is the most popular cryptocurrency. Ever since Musk’s tweet, Bitcoin has fallen from $58,000 to $34,000. Swings here and there have followed, but the asset has been unable to scale the $40,000 mark for the past few days.
Other assets have seen their price tumble as well. Ethereum crossed the $4,000 mark earlier this month and was riding pretty high, but this wipeout has left it fighting to stay over $2,000. The belief is that it would drop below that benchmark before the week is over.
Binance Coin has been perhaps the most affected altcoin. The asset, which traded as high as $691 just a few days ago, has seen its value plummet to $250. In addition, several major altcoins that had made significant gains across the board - including Litecoin, Bitcoin Cash, and even Dogecoin - saw their values crash as it now appears that the bull market that started months back is coming to an end.
Where Do We Go From Here?
A Long Market Consolidation
Perhaps the first thing that anyone will recommend at this point is patience. Market corrections happen pretty much all the time, although this one seems to have hit the market even worse. So, while consolidations happen after corrections pretty frequently, the truth is that this one could take a while to form.
Like many in the market say, this is an opportunity to see if participants have diamond hands or not. A lot of people already panicked when the market began to crash, and their price action only caused an even worse crash down the line. However, some have seen this as an opportunity to buy up more Bitcoin and stock their crypto portfolios.
Regulation Comes Into Play
Another area where people seem to be more interested is in the area of regulation. The recent market slump has made everyone realize how bad things can get in the crypto market, and there is no doubt that several people would have made investments without considering the ramifications or doing their proper research. When regulators understand this, they could be more willing to enforce crypto laws one way or the other.
Earlier this month, Caitlin Long, the founder and CEO of Avanti Capital, said that she could see a wave of regulations coming to the crypto market. As Long explained, these regulations would be pretty exciting, although they won’t all be positive.
Bloomberg also reported that U.S. lawmakers could be revisiting regulations in the wake of the market crash. Per the report, several financial regulators in Washington are still unsure how best to regulate the crypto markets. Randall Quarles, the Vice Chairman of Supervision at the Federal Reserve, told Capitol Hill that the agency is still studying the issue to properly address it.
If regulations can come into play and all parties can agree on how best to address cryptocurrencies, we could finally see a proper consolidation that will help improve the market’s standing and provide a basis for even higher gains in the future. For now, however, regulators must get a clear understanding of how best to approach the market from a policy standpoint.