Following a record high of US$58,354 bitcoin plummeted, but Square’s support brought it back up to US$48,207.
Musk tweeted that the value of the cryptocurrency Bitcoin seemed “high” as it hit a record high of record US$58,354. Tesla had earlier disclosed it held US$1.5 billion worth of bitcoin and it expected to be able to trade in it.
The Tesla CEO’s tweet did the trick as bitcoin plunged 13.3 percent to US$46,951.51, tracking toward its biggest daily loss since March. Its fall in value was compounded by comments from US Treasury Secretary Janet Yellen.
Yellen called bitcoin an “extremely inefficient way of conducting transactions” and warned about its use in illicit activity. She also sounded the alarm about its impact on the environment, with the cryptocurrency’s surge reminding critics of the sheer amount of electricity needed to produce new coins.
However, after Jack Dorsey’s Square said in announcing its fourth-quarter financial and full-year 2020 results it bought around 3,318 bitcoins for US$170 million, its value came back to US$48,207 – down 11 per cent.
“Aligned with the company’s purpose, Square believes that cryptocurrency is an instrument of economic empowerment, providing a way for individuals to participate in a global monetary system and secure their own financial future. The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to assess its aggregate investment in bitcoin relative to its other investments on an ongoing basis,” the company said.
Tesla shares fell as much as 13.4 per cent per cent and pared losses to end down 2.1 per cent. It closed at a record high of US$883 on 26 January.
“Bitcoin is the smart move at the right time for Tesla in our opinion, but on the downside its playing with firecrackers and risks and volatility are added to the Tesla story,” Daniel Ives, Tech Analyst for Wedbush Securities, told CNN.
The falls saw Musk replaced by Amazon Founder and CEO Jeff Bezos as the world’s richest person, according to the Bloomberg Billionaires Index. Musk’s net wealth has fallen to US$180 billion, compared to Bezos, who has seen his net wealth increase fractionally to US$187 billion.
Last Thursday, Tesla reduced the sale price of the base version of its Model Y and its best-selling Model 3 cars by up to US$2,000 each, cutting the price for the standard-range Model Y to US$38,490 and the standard range Model 3 to US$35,490. Over the weekend, the cheapest Model Y disappeared from Tesla’s sales website, leaving only the more expensive long-range and performance versions of the SUV. Tesla has not explained the decision.
Tesla shares rose a market-leading 743 per cent in 2020, as investors embraced Musk’s vision. Tesla remains by far the most valuable vehicle manufacturer in the world, with a market value well above that of the eight largest carmakers combined.