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Bitcoin slumps over 18% from record levels days after Elon Musk tweeted prices 'seem too high'

The maverick CEO was responding to economist and cryptocurrency skeptic, Peter Schiff, who said that gold was better than both bitcoin and conventional cash.

February 23, 2021 / 01:34 PM IST

After touching life-time highs of around $58,300, bitcoin prices fell over 18 percent in a two-day sell-off which took the premier cryptocurrency below the $50,000-mark. At the time of writing this copy, bitcoin was trading 10.12 percent lower at $50,364.52. It touched a 24-hour high of $56,668.45 and a 24-hour low of $47,780.75. Year-to-date, bitcoin is up about 73 percent.

While the general weakness in the financial markets could have weighed on the prices, billionaire CEO Elon Musk's latest tweets on the cryptocurrency may have accelerated the flash crash.

On Saturday, the Tesla chief tweeted the price of bitcoin and ethereum seemed high. The maverick CEO was responding to economist and cryptocurrency skeptic, Peter Schiff, who said that gold was better than both bitcoin and conventional cash.

Musk said in a tweet: "Money is just data that allows us to avoid the inconvenience of barter ..."


"That said, BTC & ETH do seem high lol," he added.



Bitcoin’s recent gains have been fueled by signs it is gaining acceptance among mainstream investors and companies. Musk himself tweeted that Tesla had bought $1.5 billion worth of bitcoin. In addition, the carmaker said it would also start accepting Bitcoin as a payment method for its products.
Following bitcoin's recent golden run, analysts have raised caution sign over the cryptocurrency as headwinds from the official sector still remains.


"The risk (for bitcoin) comes from the official sector. On one hand, the private sector is embracing bitcoin, both as a form of payment and as a way to invest but the official sector may say enough is enough," Mohamed A El-Erian, chief economic adviser at Allianz said recently.


Another reason for apprehension from experts is high volatility in bitcoin prices and lack of tangible backing.

"Bitcoin presently is not an efficient manner for high-volume transacting, and it is certainly not a store of value as its price volatility at 80 percent is a dozen times higher than the euro and sevenfold of the Russian rouble," said Harley Bassman, managing partner at Simplify Asset Management told Reuters.

"That said, it is a perfectly legitimate speculative asset, quite similar to Dutch tulips in 1636. Will it meet the same fate? That is unclear. As such, size your risk appropriately."

Dutch tulips in the 1600s reached extraordinarily high levels before dramatically collapsing in 1637.

Moneycontrol News
first published: Feb 23, 2021 12:48 pm

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