Bitcoin was heading on Friday for its worst week since February, while dogecoin leapt by a quarter, as the latest tweets on cryptocurrencies from Tesla boss Elon Musk sent the digital coins on a wild ride.
Early in the trading day on Friday, bitcoin was changing hands at just over $50,000 US. It’s down about 13 per cent this week and by more than 20 per cent from its record of just under $65,000 last month.
Much of bitcoin’s losses came on Tuesday evening after Elon Musk, the CEO of electric car company Tesla, announced that his company would no longer accept bitcoin as payment because of the massive environmental cost of mining the cryptocurrency.
“I strongly believe in crypto, but it can’t drive a massive increase in fossil fuel use, especially coal,” Musk said.
Bitcoin relies on increasingly complicated computations to be mined, which creates massive demand for electricity to mine it. A single bitcoin transaction takes 707 kilowatt hours to process, according to data centre provider TRG. That’s roughly the same amount of electricity that a typical Canadian home would use in about a month.
Musk’s about-face caused the price of bitcoin to plummet. Bitcoin traded as low as $48,000 US at one point on Wednesday, before inching up to the $50,000 level where it has see-sawed above and below ever since.
Bitcoin’s loss was dogecoin’s gain, however, as the shiba inu-themed cryptocurrency that Musk is a fan of rose to new heights.
On Thursday, Musk tweeted that he is working with developers behind dogecoin to make that system more efficient. Currently, the typical dogecoin transaction uses 0.12 kilowatt-hours of electricity, TRG says.
Musk has been a fan of doge since 2019, but poked fun at it on his appearance on Saturday Night Live last weekend. That caused the price of doge to plummet, but his continuing interest in the currency lit a fire under the price again on Thursday.
The currency has been as high as 74 cents and as low as 38 cents US in the past week. But by Friday morning, doge was trading at 54 cents US.
One person being able to cause such wild swings in the price of cryptocurrencies is giving many people in the space pause.
“The problem here is that a loose cannon CEO continues to shoot his mouth off about any number of potential market moving events,” said Dennis Kelleher, CEO of think-tank Better Markets. “It’s clearly grossly irresponsible but it may not be illegal.”
“Toppy markets [are] looking for an excuse to breathe,” said Ben Sebley of crypto firm BCB Group. “Long money doesn’t care about Elon’s tweets. Fast money trades around that stuff now.”
Bloomberg Intelligence strategist Mike McGlone says trying to predict the direction of something as volatile as doge is basically a cryptocoin toss, but “we see greater risks for mean reversion toward 5 cents vs. the potential to reach a buck,” he said in a note to clients. “Musk on Saturday Night Live may have marked peak dogecoin speculation.”