Bitcoin, the world’s most valuable digital currency, fell below $25,000 during the 13th session, reaching an 18-month low amid a double whammy of negative sentiment that has shattered investor confidence and seen the overall cryptocurrency market evaporate by more than $150 billion since the end of last week.
Bitcoin could fall to $20,000, according to leading economist Peter Schiff, who advises investors not to “take the plunge” at this time.
Bitcoin finished the day 14.7 per cent lower at $23,322, the lowest since December 2020, with Ethereum and Dogecoin also falling in tandem.
The heavy selling pressure in the cryptocurrency market was due to two factors, namely the expected more aggressive tightening of monetary policy by the US Federal Reserve and the sudden suspension of withdrawals by Celsius, the world’s largest cryptocurrency lending platform, which allows people to store bitcoin and other cryptocurrencies in their accounts and pays them interest.
The Fed’s aggressive round of interest rate hikes has already taken a toll on crypto assets. However, on May 10th, the US Consumer Price Index (CPI) data hit a 40-year high, increasing traders’ bets that the Fed will tighten monetary policy more aggressively, triggering a sell-off in risky assets such as cryptocurrencies and stocks.
At 11:35 a.m. on the 14th, Bitcoin was trading at $22,161.9, down more than 13% in 24 hours.
Tesla said that in the first quarter of 2021, it spent $1.5 billion on bitcoin, or 43,200 bitcoins, at an average purchase price of around $34,700. It sold 4,800 bitcoins in the same quarter, earning $272 million, and has not sold since. According to the most recent quarterly report, the company had a market value of $1.26 billion as of the end of March this year.
However, based on the approximately 38,000 bitcoins remaining in Tesla's holdings, and with bitcoins now at $21,000, it is expected to lose $13,700 per bitcoin, or a loss of $520 million, or 10% of its full-year 2021 earnings of $5.5 billion, equivalent to 9,551 US Model Y LRs (priced at $54,440).
According to Bitcoin.com, leading economist Schiff predicted that bitcoin could fall to $20,000 and Ethereum could fall to $1,000 and investors could lose a lot of money if they bought now.
"With food and energy prices on the rise, many bitcoin holders will be forced to sell their bitcoins to pay for necessities - after all, grocery stores and gas stations do not accept bitcoin," he explained.
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