July 29, 2021

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Tesla chief Elon Musk tweets and Bitcoin jumps, again

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Musk’s latest tweet on potentially allowing Bitcoin transactions for Tesla sent the currency surging nearly 10 percent.

Tesla Inc Chief Executive Officer Elon Musk has tweeted that the electric carmaker will resume allowing Bitcoin transactions when miners who verify transactions use more renewable energy.

“When there’s confirmation of reasonable (~50 percent) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” he said in a tweet on Sunday.

Bitcoin surged 9.8 percent to $39,035.47 on Sunday, adding $3,492.71 to its previous close.

Musk’s post was in reply to a report in Cointelegraph, which cited Magda Wierzycka, executive chair of South African asset manager Sygnia, as saying Musk’s recent tweets on Bitcoin should have prompted an investigation by the US Securities and Exchange Commission.

Bitcoin, the world’s biggest and best-known cryptocurrency, is up 40.7 percent from the year’s low of $27,734 on January 4. It was down about 1 percent to $38,881 as of 7am in Hong Kong on Monday (23:00 GMT on Sunday).

Ether, the coin linked to the ethereum blockchain network, surged 7 percent to $2,532.77 on Sunday, adding $165.77 to its previous close.

Musk also said that Tesla sold about 10 percent of holdings to confirm Bitcoin could be liquidated easily without moving the market.

‘Positive momentum’

“The tweet added to positive momentum as Elon’s stance seems to be moderating and providing a target that’s not far away,” said Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX. “The rally was already under way as the market speculates about an imminent purchase from MicroStrategy and the G-7 comments on crypto were neutral, even optimistic, about digital innovation.”

MicroStrategy Inc, whose Chief Executive Officer Michael Saylor has become a vocal Bitcoin evangelist, last week boosted a junk-bond offering for the purposes of buying the cryptocurrency to $500m from $400m.

Musk has whipsawed Bitcoin and other digital tokens in the past few months. In February, Tesla announced it had bought $1.5bn in Bitcoin and signalled its intent to start accepting Bitcoin as payment for vehicles. In March, Musk tweeted, “you can now buy a Tesla with Bitcoin,” only to say in May that the practice was suspended due to concerns about fossil-fuel usage for Bitcoin mining and transactions. Bitcoin fell more than 10 percent after that tweet.

The U-turn has been controversial, as Wierzycka’s reported comments indicate, partially because the moves by Tesla and Musk have had noticeable effects on bitcoin’s price. While there are other issues out there, ranging from institutional adoption and diversification on the positive side to sustainability and regulatory concerns on the negative, a Musk tweet can often change momentum and can dominate the narrative for days or weeks.

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