Bitcoin drops to new low after Binance probe reports, Tesla fallout 

Photo by Andre Francois on Unsplash

Bitcoin slid to a 2-1/2-month low on Thursday after a regulatory probe into crypto exchange Binance added to pressure from Tesla Inc chief Elon Musk’s reversing his stance on accepting the digital currency.

Bloomberg reported on Thursday that as part of the Binance inquiry, the U.S. Justice Department and the Internal Revenue Service have sought information from individuals with insight into its business.

Bitcoin dropped to $45,700, the lowest since March 1, then steadied at $49,312 in Asia morning trade on Friday.

The world’s largest cryptocurrency fell 17% on Wednesday following Musk’s remarks that Tesla would stop accepting the digital token as payment for its electric cars for environmental reasons.

“Environmental matters are an incredibly sensitive subject right now, and Tesla’s move might serve as a wake-up call to businesses and consumers using bitcoin, who hadn’t hitherto considered its carbon footprint,” Laith Khalaf, an analyst at AJ Bell, said.

Bitcoin remains about 70% higher for the year and is more than 1,000% higher than its 2020 low of $3,850.

Binance did not immediately respond to a request for comment. A Binance spokeswoman told Bloomberg that the company doesn’t comment on specific inquiries but takes its legal obligations seriously and engages with regulators in a collaborative fashion.

Ethereum, the second-largest cryptocurrency, dropped to a session low of $3,543.62 and last changed hands at $3,656, down about 4%. On Wednesday, ethereum hit a record high of $4,380.64.

Tesla’s announcement on Feb. 8 that it had bought $1.5 billion of bitcoin and would accept it as payment for its electric vehicles has been one factor behind the digital currency’s surge this year.

Musk has faced pressure over bitcoin’s environmental impact. The cryptocurrency relies on computers competing to solve elaborate math problems, which use huge amounts of electricity.

“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk tweeted.

Musk’s comments roiled markets even though he said Tesla would not sell any bitcoin and would resume accepting it as soon as “mining” for it transitioned to more sustainable energy.

In a second tweet on Thursday, Musk denounced the “insane” amount of energy used to produce bitcoin, which pushed bitcoin lower.

Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider, said broader selling of risk assets in traditional markets was another factor behind Wednesday’s bitcoin plunge.

“I don’t think everything is selling off just because of this news. This was kind of the straw that broke the camel’s back in terms of adding to the risk sell-off,” Wang said.

Bitcoin has struggled since hitting a record $64,895.22 in mid-April, dropping to the cusp of $47,000 just 11 days later before hovering around $58,000 since the start of May.

ENVIRONMENTAL CONCERNS

At current rates, bitcoin mining devours about the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency showed.

Tesla shares were down 2.4%, while the biggest U.S. cryptocurrency exchange, Coinbase, tumbled nearly 9%. Smaller cryptocurrencies were less affected by the news.

“The reason given in the tweet is fossil fuel use for the mining of BTC, but most cryptocurrencies have already found more efficient ways to do that and therefore outperformed.”

Cryptocurrency dogecoin lost more than a third of its price on Sunday after Musk, whose tweets had stoked demand for the token earlier this year, called it a “hustle” on the “Saturday Night Live” comedy show.

By Tuesday, however, he was asking his followers on Twitter if they wanted Tesla to accept dogecoin and it jumped on Friday in Asia after Musk tweeted about it again and said he was working on improvements to its transaction systems.

Dogecoin rose 20% to 52 cents on Friday according to Binance and last traded at $0.4825.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.