Bitcoin surges:
On March 24, 2021, Musk announced that Tesla would start accepting Bitcoin payments, and that the Bitcoin received would be retained and not converted into fiat currency. Following this news, the price of Bitcoin surged. The main reasons are as follows:
- Increased market demand: Tesla's acceptance of Bitcoin payments as a well-known company demonstrates Bitcoin's practicality, making Bitcoin ownership not only an investment but also a means for actual consumption, attracting more people to buy Bitcoin, leading to a significant increase in market demand and driving the price up.
- Supply is relatively tight: The total amount of Bitcoin is limited, and companies like Tesla hold a large amount of Bitcoin without converting it into fiat currency, which reduces the number of Bitcoins available in the market. As demand increases, the tight supply further exacerbates the upward price trend.
- Corporate demonstration effect: Tesla's move sets an example for other companies, prompting more businesses to consider whether they should also accept Bitcoin payments. This, to some extent, enhances market confidence and recognition of Bitcoin, encouraging more funds to flow into the Bitcoin market and driving the price up.
- Celebrity effect: Musk, as a highly influential entrepreneur and public figure, supports and promotes Bitcoin, which causes many of his fans and followers to follow suit and invest in Bitcoin, thus driving the price up.
Bitcoin plummets:
On May 12, 2021, Musk stated on Twitter that Tesla would suspend accepting Bitcoin as a payment method for cars due to concerns about the rapid increase of fossil fuel usage in Bitcoin mining and transactions, which impacts the environment. Following this news, the price of Bitcoin plummeted. Market information agency 'Bitcoin Counter' reported that the spot price of Bitcoin fell to $46,294.72 on that day, a decrease of 20.23% compared to the high point within 24 hours. The futures price of Bitcoin for May delivery on the Chicago Mercantile Exchange fell to a low of $46,395 in after-hours trading that evening, down 14.78% from the closing price of $54,445 that day.
Musk, as a highly influential entrepreneur, has a strong guiding effect on the market. Previously, Tesla's support for cryptocurrency drove the price of Bitcoin skyrocketing, while the recent decision to suspend accepting Bitcoin payments has shaken market confidence in Bitcoin, causing investors to worry about Bitcoin's future development, leading to a massive sell-off and a sharp drop in its price.
The influence of the world's richest person can lead to significant fluctuations in Bitcoin's price, leading one to wonder if Musk is profiting by cutting off retail investors holding Bitcoin, prompting deep reflection! Now Musk and Trump are also promoting Bitcoin; will history's tragedy repeat itself?