Elon Musk and COVID-19 have one thing in frequent: They’ve each panicked buyers — not less than as soon as — into dumping their Bitcoin (BTC) holdings.
The similarities notched up greater within the earlier six days as Musk doubled down on his chaos-inducing perspective towards Bitcoin. The billionaire entrepreneur engaged in a Twitter spat with prime cryptocurrency advocates over the weekend, together with podcaster Peter McCormick, as he projected his favourite token, Dogecoin (DOGE), as superior to Bitcoin.
Obnoxious threads like this make me need to go all in on Doge
— Elon Musk (@elonmusk) May 16, 2021
At one cut-off date, Musk nearly admitted that he would have Tesla unload the $1.5 billion funding that it had made in Bitcoin in February. In the meantime, the bids for the flagship cryptocurrency saved on declining with every of Musk’s tweets. First, they went to $50,000, then sub-$45,000, ultimately to bottom-out close to $42,000.
Musk later clarified that Tesla has not dumped its bitcoin holdings.
To make clear hypothesis, Tesla has not offered any Bitcoin
— Elon Musk (@elonmusk) May 17, 2021
However his clarification did little in offsetting Bitcoin’s draw back bias. The cryptocurrency ultimately prolonged its bearish correction to greater than 35% when measured from its all-time excessive of practically $65,000.
That additionally marked one of many quickest and deepest top-to-bottom retracement strikes within the cryptocurrency’s latest historical past, with on-chain indicators exhibiting that its impression available on the market bias was as unhealthy because the one brought on by the Black Thursday crash in March 2020 within the wake of the coronavirus pandemic.
In the meantime, blockchain analytics platform Glassnode reported a decline within the earnings of Bitcoin’s circulating provide by way of its proprietary metric.
The “BTC % Provide in Revenue (7d MA)” confirmed readings close to 81.122 as of London morning on Tuesday, its lowest degree since October 2020. The readings had been additionally weak in the course of the March 2020 crash, whereby Bitcoin declined by greater than 50%.
Extra on-chain indicators level out comparable readings between the present, Musk-led Bitcoin value crash and the one which appeared amid the coronavirus panic in March 2020.
For example, the Bitcoin switch quantity tracker at Glassnode showed a spike in BTC influx throughout all of the exchanges. Its scale was similar to the inflows seen in the course of the March 2020 sell-off and the distribution by the PlusToken Ponzi scheme in 2019.
A better BTC influx signifies the next likelihood of merchants promoting these tokens for different property, together with fiat and altcoins. Conversely, the next outflow reveals merchants’ willingness to carry BTC for longer durations.
Institutional versus retail sentiment
Glassnode’s Bitcoin switch quantity knowledge, in the meantime, offered two stark funding views between retail and establishments. In its weekly publication, the analytics platform broke down its statement primarily based on the influx/outflow knowledge collected from two of the world’s largest cryptocurrency exchanges: Binance and Coinbase.
Binance is a non-United States entity that pulls largely retail merchants and buyers all over the world. In the meantime, Coinbase’s standing is greater amongst U.S.-based institutional buyers. Glassnode famous that Binance was the largest receiver of the Bitcoin inflows in the course of the Musk-led market crash.
“This gives additional indication that the latest inflows are more likely to be pushed by each new market entrants (panic sellers) and doubtlessly as a result of capital rotation into different crypto-assets,” wrote Glassnode in a weekly observe.
Ki Younger Ju, CEO of CryptoQuant — a South Korea-based blockchain analytics platform — additionally noted that the majority BTC inflows went to Binance, including that it’s not essentially a bearish sign.
“I’m going to attend till the influx sign cools off,” he added, nonetheless.
However, Coinbase has logged greater new Bitcoin outflows ever because the cryptocurrency broke above the $20,000-price milestone final yr. The development continued even within the present week, exhibiting that institutional buyers had been absorbing the retail market’s promoting stress.
In different phrases, wealthy buyers bought Bitcoin at native lows as common ones offered them beneath the affect of Musk.
“Don’t hearken to what they are saying,” stated early-stage investor Anthony Pompliano in his observe to purchasers on Monday. He added:
“Simply watch what they do with their cash. Elon Musk and Tesla perceive that they’re going to be depending on bitcoin shifting ahead. It wouldn’t shock me if they’re really shopping for extra bitcoin now at depressed costs or not less than plan to buy extra sooner or later.”
Pompliano added that Bitcoin stays the best-performing macro asset, an “apex predator” with vastly outperformed shares, bonds, actual property and commodities. Twitter CEO Jack Dorsey, whose fee firm Sq. added Bitcoin to its stability sheet to beat inflation fears, additionally famous on Friday that his group would “perpetually work” to make Bitcoin higher.
The feedback got here in distinction to Musk’s assist for Dogecoin. Veteran investor Paul Santos wrote in his Searching for Alpha piece that the Tesla CEO would possibly need to make cash out of skinny air by exploiting the so-called cryptocurrency euphoria.