After Musk’s “Tesla & Bitcoin” tweet shook markets two weeks ago, fear and uncertainty have echoed throughout social media, and prices have struggled to recover. But Musk wasn’t the only contributing factor. Even after he tweeted encouragingly about speaking with North American miners about renewable energy on Monday, the Crypto Fear & Greed Index — which tracks investor sentiment — still indicated “Extreme Fear” in the market. So what else has been impacting prices?
Monday, May 17, was Tax Day for many Americans, and those who took profits during a year of record crypto highs may have needed to sell a portion of their positions to cover capital gains taxes.
The US Treasury announced Thursday that crypto transfers of $10,000 or more will have to be reported to the IRS. Several days later, The Washington Post reported the White House is exploring more crypto guardrails that one source said will still allow investors to “dogecoin to their heart’s content.”
Bitcoin’s decline triggered an additional $8 billion liquidation of leveraged positions, meaning firms and individuals that borrowed money to buy bitcoin were forced to sell so lenders could limit losses, intensifying the selloff.
A high-ranking Chinese official called for regulators to “crack down on bitcoin mining and trading” on Friday, perhaps in part to protect the new state-backed digital Yuan. China hosts the majority of global mining, so large operations saying they’d look elsewhere might have spooked markets.
However, some have noted China’s stance isn’t new, and even suggested the positive impact of dispersing mining around the world.
Why it matters… Musk may have kicked off market volatility several weeks ago with questions about Bitcoin’s environmental impact, but his positive crypto tweets since then haven’t helped prices recover substantially. His note about meeting with bitcoin miners to discuss renewable energy initiatives prompted prices to jump, but less than 24 hours later, BTC had mostly returned to pre-tweet levels. The lesson? No one single person or factor controls the market.