Elon Musk

The Bitcoin price crashed by more than 20% in the overnight session as worries of high interest rates rose and after the decision by Tesla to abandon the cryptocurrency. The BTC declined to $46,000 and then rebounded to above $50,000 as investors rushed to buy the dip.

BTC, ETH, BNB crashed after Tesla’s announcement

Elon Musk and Bitcoin

Elon Musk announced that Tesla would invest in Bitcoin in February this year. He also said that the firm would start accepting Bitcoin in February this year. This view was welcomed well by traders and investors, who pushed Bitcoin prices and Tesla shares to a record high. However, the company was criticized by environmentalists for the environmental impacts because of Bitcoin mining.

BTC environment

In a surprise announcement on Wednesday, Musk cited the environmental concerns when he said that the company would no longer accept Bitcoin for purchases. Instead, he said that the company would be looking at other cryptocurrencies that don’t consume too much power. He hinted at Dogecoin, which most of his Twitter followers support. Musk did not say whether Tesla would be selling the Bitcoins it owns already.

In a surprise announcement on Wednesday, Musk cited the environmental concerns when he said that the company would no longer accept Bitcoin for purchases. Instead, he said that the company would be looking at other cryptocurrencies that don’t consume too much power. He hinted at Dogecoin, which most of his Twitter followers support. Musk did not say whether Tesla would be selling the Bitcoins it owns already.

Still, Tesla is a relatively small participant in the Bitcoin industry. The company owns Bitcoins worth about $1.5 billion, which is substantially lower than the currency’s market cap of more than $1 trillion.

Tesla hypocritical on Bitcoin

However, the decision is a hypocritical one. Furthermore, Tesla shares have already declined by more than 34% from their all-time high. 

First, while Tesla cars don’t consume fossil fuels, they are usually powered by coal in most countries like China. In fact, some estimates say that Tesla cars have a worse environmental impact than some gasoline cars. 

Second, battery manufacturing uses many products that are not environmentally friendly. Indeed, according to the United Nations, developing countries pay the environmental cost of mining of commodities used to manufacture batteries like cobalt. The UN said:

“The environmental risks are just as worrying. Cobalt mine sites may contain sulphur minerals that can generate sulfuric acid when exposed to air and water. This process, known as acid mine drainage, can devastate rivers, streams and aquatic life for hundreds of years.”

The Bitcoin price also declined because of the fear of high-interest rates. In a report published yesterday, the Bureau of Statistics said that US inflation surged by 4.2% in April. This was the highest growth in more than a decade. Therefore, there are fears that the Federal Reserve will start hiking interest rates. The bureau will publish the producer price index data today.

Bitcoin price technical analysis

Bitcoin price
Bitcoin price technical chart

Turning to the daily chart, we see that the BTC price has been moving sideways recently as most attention has turned to Ethereum. The price has been in a range between its all-time high of above $64,000 and $46000. However, the price has moved below the 25-day and 50-day moving averages. It has also formed a head and shoulders pattern. 

Therefore, while BTC has had a relief rally, I suspect that it will decline further in the near term because of high-interest rates fears. This prediction will be confirmed if the currency moves below the overnight low of $46,000.

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