In a tweet on Wednesday night (May 19, Vietnam time), Elon Musk posted the message “Tesla has Diamond Hands”. This tweet implies that the electric vehicle manufacturer will not sell its $1.5 billion worth of Bitcoin, but instead continue to “Hold” for a longer period, according to CNBC.
Notably, Musk’s tweet came just as Bitcoin experienced a sharp decline on the evening of May 19. At one point, the price of Bitcoin dropped to around $30,000. However, thanks to Musk’s ‘reassuring’ statement, the price of Bitcoin quickly rebounded to about $40,000 (as of midnight on May 20), according to Binance data.
It is worth mentioning that Bitcoin’s plunge to this price level has wiped out almost all of Tesla’s profits since entering the cryptocurrency market (assuming Tesla has not sold any Bitcoin). In February 2021, Tesla spent $1.5 billion to acquire 43,000 BTC, with an average purchase price at that time of around $34,800. Just a few months later, Tesla’s profits nearly doubled when Bitcoin peaked at $64,000.
However, the rapid decline in Bitcoin’s price has quickly eroded Tesla’s profits. In fact, if Bitcoin’s downward trend continues below $30,000, Tesla could find itself in a precarious position. Many cryptocurrency investors on social media, particularly Twitter, claim that Musk’s latest tweet was merely to help reverse Bitcoin’s trend, indirectly preventing Tesla’s investment from incurring losses.
Previously, on May 12, Elon Musk announced that Tesla had suspended vehicle purchases with Bitcoin due to concerns that the mining process for this cryptocurrency would impact the environment. Following this announcement, $300 billion in cryptocurrency market capitalization was wiped out the same day. Last weekend, Elon Musk hinted on Twitter that Tesla might sell its Bitcoin, which drove Bitcoin prices ‘even lower.’ Although Musk later clarified that Tesla had no intention of selling Bitcoin, the cryptocurrency market continued to experience a steady decline in value.
Most recently, the drop in Bitcoin occurred on the morning of May 19 after the People’s Bank of China (PBOC) reaffirmed its stance against accepting any form of payment in cryptocurrency. This negative news dealt a ‘devastating blow’ to Bitcoin, causing a panic among investors and leading to a sell-off.
Source: CNBC