Bitcoin has been near its lowest in more than two months on Friday while being headed for its worst week since February. Meanwhile, the meme cryptocurrency, Dogecoin has seen a sudden jump by a fifth as tweets from Tesla CEO Elon Musk changed the market trends for these two cryptocurrencies.
Markets have been responding and moving according to Musk’s tweets for months after he showed interest in dogecoin. It sparked a hundred-fold rally in the previously ignored token’s value this year. Meanwhile, Tesla’s $1.5 billion bitcoin purchase helped this one to break past the $50,000 barrier in February.
However, what followed next was something completely unexpected. In an unexpected turn of events, Elon Musk dented the world’s biggest cryptocurrency this week after announcing Tesla has stopped accepting bitcoin in payment due to environmental concerns. This made investors quite uneasy about Musk’s influence on crypto prices. Bitcoin is down nearly 15% this week at $49,804.
However, Dogecoin is also down about a third since last Friday, having tumbled after Musk referred to it as a “hustle” on Saturday Night Live. The price hiked again by 20% after Musk’s latest comments stating that he was involved in work to improve Dogecoin’s efficiency.
“Working with Doge devs to improve system transaction efficiency. Potentially promising,” Musk wrote on Twitter, which helped dogecoin to surge from $0.43 to $0.52 on the charts of Binance exchange.
It was unclear if Musk was referring to efficiency in terms of energy use, ease of use or suitability as a currency, according to Mark Humphery-Jenner. Mark is an associate professor of finance at the University of New South Wales business school in Sydney.
Dogecoin consumes about 0.12-kilowatt hours of electricity per transaction compared to the requirement of 707 kilowatts for bitcoin, says the data center provider TRG. However, it is currently impossible to use it to buy anything.
Almost worthless in late 2020, dogecoin is the latest fancy of the crypto markets that began last year where institutional investors announced big bitcoin purchases. Doge has surged to become the fourth-largest cryptocurrency by market cap, according to CoinMarketCap.com. The Second-biggest cryptocurrency ethereum has also soared more than 400% this year. Its previous price was $3,865 which was steady for the week so far.
Musk’s tweets and the pounding response of the market may also invite attention, said Edward Moya, an analyst at brokerage OANDA. “Tesla is drawing tremendous scrutiny for Musk’s cheerleading of Bitcoin,” he said. “If Tesla unveils a bet on dogecoin, regulators may have their eyes on Musk,” Moya added.
However, according to David Kimberley, an analyst at investing app Freetrade, “Dogecoin remains a lesson in greater fool theory,”. He stated that buying overpriced assets can be profitable, so long as there is a “greater fool” to buy them at ever-higher prices. “It’s being pumped by people that want to get rich quick (and Elon Musk),” he added.