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Bitcoin, the biggest cryptocurrency by market cap, had a couple of bad weeks already. After the big crash caused by Elon Musk’s announcement that Tesla would suspend accepting bitcoin. Bitcoin declined from 60,000 USD to 43,00 USD within one week, while many altcoins have recovered from the loss.
Has the storm passed? There seems to be a consensus that bears are taking over the market. A series of bad news now flash warning that investors should take action to protect their wealth. Now it seems that a war between Musk and mainstream crypto supporters has broken out.
Elon Musk is an icon for many crypto traders. Musk’s tweets on the price of bitcoin and dogecoin have shown influence time and time again. In March, the BTC price broke 60,000 USD for the first time after he announced that people could buy Tesla cars with Bitcoin. Musk’s tweets clearly show that he favors dogecoin over bitcoin. Although he has gained much support from dogecoin supporters, his credibility in the crypto community has dwindled much. There are claims that Musk’s tweets show an elaborate pump n dump scheme.
Let’s see what has rattled the crypto market in the past few days.
On May 14, CZ, CEO of Binance, unfollowed Elon Musk.
On the same day, Musk revealed that he was working with Doge developers to improve system transaction efficiency. In response to Musk’s reversed attitude, a large number of investors declared that the crypto community should stop Musk from “manipulating the market”, and many claimed that Dogecoin is “shitcoin”.
On May 16, MicroStrategy founder Michael Saylor replied that “The world needs a decentralized, secure, deflationary store of value like #Bitcoin much more than it needs the more centralized, less secure, inflationary medium of exchange that you describe above.”
On May 16, Musk tweeted that Dogecoin can “wins hands down” if it “speeds up block time 10X, increases block size 10X & drops fee 100X.” However, a core developer of Litecoin commented that the above-mentioned functions mentioned by Musk cannot be realized at all, and such a fast network was not necessary for dogecoin.
On May 17, Musk implied that Tesla may or may have already sold its Bitcoin, which quickly caused a sell-off of Bitcoin and most altcoins.
While many investors blame Musk for manipulating the market, one must ask: what gives Musk the power to do so, if cryptocurrency is as decentralized as it claims to be?
The answer is simple: cryptocurrencies are still in the early stage of development and even bitcoin cannot call itself a mainstream currency. Every new use case and institutional adoption can help bitcoin go mainstream and boost its value. The year 2020 has shown us what institutional endorsement can do to pump bitcoin. The road to a global store-of-value is rocky and high volatility is not leaving anytime soon.
On the bright side, the market is still optimistic for the long term. Morgan Creek Capital CEO believes that BTC may be traded at 250,000 USD by 2025. But in the near term, bitcoin may need some time to recover from the Musk effect, and it could drop below 40,000 USD. In the 2017 bull run, the biggest correction we saw was 41%. If that repeats, bitcoin could drop to 38,000 USD.
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