The value of bitcoin fell to just over $52,000 on Monday from heights of $58,000 earlier in the week — a nosedive that could be in large part due to a tweet by Tesla CEO and cryptocurrency buff Elon Musk and a comment made by Treasury Secretary Janet Yellen.
It's a reminder that the cryptocurrency is still highly susceptible to drastic changes in valuation. All it takes to topple the house of cards is a tweet by the richest person in the world.
"An email saying you have gold is not the same as having gold," Musk argued in a Saturday tweet. "You might as well have crypto."
Musk also argued that "like all data" cryptocurrencies are "subject to latency and error," which both will be minimized as the system evolves.
"That said, BTC and ETH do seem high lol," Musk added in a characteristically tongue-in-cheek follow-up tweet, referring to bitcoin and ethereum, an alternative open source cryptocurrency.
Adding to the drama was Yellen, who warned of an "extremely inefficient" bitcoin in an interview with CNBC earlier this week. "I don’t think that bitcoin... is widely used as a transaction mechanism," she said.
"To the extent it is used I fear it's often for illicit finance," she added. "It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering."
She has a point. Mining bitcoin, an extremely inefficient and power hungry process that requires an immense amount of computer processing, was found to consume more electricity in a year than all of Argentina, as the BBC reported earlier this month.
Bitcoin's recent volatility shouldn't come as a shock to anybody. With Elon Musk pulling the strings — his electric car company bought a whopping $1.5 billion worth of the cryptocurrency mere weeks ago — bitcoin is becoming more relevant than it has ever been. The financial sector is also warming up to the idea of transactions being made on its networks using decentralized cryptocurrencies.
But widespread adoption doesn't address the heart of the issue: volatility caused by an unbacked decentralized currency. To some, Musk included, it's a golden opportunity. To thinkers like Yellen, though it's a boondoggle. And that tension is likely to persist over the following months and years.
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