The Donald Trump of cryptocurrencies – Tesla founder Elon Musk – sent the price of Bitcoin higher on Monday afternoon in the US after he tweeted that he had been talking to American miners of bitcoin about sustainability.
Musk tweeted that he was having active discussions regarding the sustainability of the digital coin a method of communications that he, (like Trump used to favour) uses to avoid questioning of his statements.
Bitcoin had risen from under $US33,000 on Sunday night to $US38,074, according to Coindesk, when at about 3:42 pm US East Coast time (according to CNBC), Musk posted on Twitter: “Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.”
Miners would promise anything to stop the slide in prices and get them rising again. They have had ample opportunity to consider and adopt more sustainable mining methods, but haven’t.
Within minutes, Bitcoin’s price had risen to more than $US39,500, taking the rise in the coin to more than 17% in the last 24 hours.
CNBC reported that “Ether, the world’s second most popular cryptocurrency, rose from less than $1,800 on Sunday to over $2,600 on Monday. It was trading around $2,647.53 by 4:07 p.m. ET – up 34.7%, according to Coin Metrics. Elsewhere, dogecoin also showed signs of recovery, with its price rising from 24 cents on Sunday to 36 cents on Monday.”
Musk’s tweet is the usual pie in the sky stuff from the Tesla founder because mining for cryptocurrencies takes an enormous amount of computing power, which use electricity. And this is a fact no matter where it happens and whatever the source of that power. The top five miners are in China (the largest in the world), Switzerland, Russia, Netherlands and Iceland. All are near large sources of electricity (Iceland’s power comes from geothermal and hydro). the companies that own these large sites have smaller farms in countries like Bosnia, Canada.
Fortune magazine reported on Monday that some miners have started moving out of China after last week’s dual warning from the government and fears of an impending crackdown.
“Huobi, the world’s second-largest crypto exchange by volume, said in a statement on Sunday that it has suspended crypto mining hosting services and the sale of crypto mining machines in China, according to Coindesk.”
“BTC.TOP, a mining ‘pool’ that allows coordinated groups to work together to mine new coins, announced a withdrawal from Chinese operations, citing regulatory concerns. Mine operator HashCow has indicated it will suspend new businesses in China and stop purchasing new mining rigs, according to Reuters.”
American crypto miners are not major influences on the mining of coin – Chinese miners are the largest with a 75% (according to Fortune) share and that’s why the crack down on mining and trading and use of the coin in that country by the national government still remains the major long tail risk.
In an SEC filing in February, Tesla revealed that it bought $US1.5 billion worth of bitcoin and would accept it as a form of payment for its cars. The company later reported a net gain of $US101 million from sales of bitcoin during the quarter, helping to boost its net profits to a record high in the three months to March. The chances of that being repeated this quarter are falling with the weaker price.
Musk changed his tune with the digital coin changed earlier this month, suddenly tweeting on May 12 that the company “suspended vehicle purchases”, out of concern over “rapidly increasing use of fossil fuels” for bitcoin mining. The ‘love affair’ was over.
Since then he has issued a series of conflicting tweets about cryptos – all while prices slumped. Last week saw him supplanted as a major influence by the two warnings from China about speculation and over consumption of electricity to create coin.
The US Treasury said from later this year coin trading generating $US10,000 or more would have to be reported to the IRS.
Musk was back to his old tricks on Monday trying to shift the debate away from these major blows to confidence to the other issue – sustainability and the environmentally destructive dangers of currently mining methods – especially in China.
But Bitcoin prices were rising before Musk’s tweet as traders ignored last week’s news and hopped back into market at lower prices. Remember price rises for Bitcoin help protect Tesla’s current position in the cryptocurrency.
The price rises for cryptocurrencies spilled over into sentiment in equities and the Dow ended the day up 0.5%, the S&P 500 1% and the Nasdaq 1.4%. A late stutter saw prices fade in the final minutes of trading.
Gold edged up by around $US5 an ounce to trade around $US1,881 in Asian dealings just after 7am Sydney time. Oil rebounded by nearly 4% and copper was up 1%.
The Aussie dollar was around 77.60 US cents at 7.30 am and the key US 10-year bond yield had fallen to 1.60%, a two-week low.
