Eighteen months ago Tesla purchased $1.5 billion worth of bitcoin, this move sparked a bullish run and was followed by an astonishing announcement by the firm that customers could now pay for its vehicles with bitcoin. But this decision did not last long with Musk citing ‘climate concerns’ as the reason. On Wednesday, earning reports filed by electric carmaker Tesla revealed that it had sold 75% of its bitcoin worth $936 million leaving $218 million in its balance sheet. The figures released by the company indicate that each bitcoin was sold at $29,000, before bitcoin plunged to $18,000.
The company ended its second quarter weak with profits falling 32% from the first quarter, this is reportedly due to a struggle to meet demand after the shutdown of its Shanghai factory and production challenges at new plants. The widespread effects of the economy seem to be leaving no prisoner behind as Tesla delivered a total of 254,000 vehicles, down by 18% from the last quarter. The company also declared a hiring freeze and began laying off workers earlier this month.
Elon Musk announced that the bitcoin dump was done to maximize Tesla’s cash position and not a statement about bitcoin. The markets did not respond favorably to the news and the price of bitcoin dropped about 2%, but still held strong trading at $22,867.
Prior to the Tesla news bitcoin had continued its upward momentum and crossed the $24,000 level. Even after the minor dip in its price, analysts are still hopeful that the upward trend could continue and that markets could see the bitcoin price rise as high as $32,300 which is the next major level of resistance.
Will the European Central Bank’s Hawkishness Affect the Bitcoin Price?
The European Central Bank (ECB) is set to raise the benchmark interest rates by 25 basis points from the current record low of -0.5% to -0.25%, but a 50 basis point hike has been seen as increasingly likely in recent days due to soaring consumer prices in the Eurozone. This rate hike comes as the Eurozone struggles with the worst inflation rate ever. Eurostat published data earlier this week that shows inflation soared to 8.6% in the EU.
Will the ECB’s decision to raise interest rates negatively impact bitcoin? The ECB’s decision is important because not only has the central bank not raised rates in over a decade, it would imply a reversal of its negative interest rate policy (NIRP). This could lead to more volatility in risk assets, including bitcoin.
Noelle Acheson, head of market insights at Genesis Global disagrees, saying that in times of notable economic turmoil, crypto assets could become more desirable as more individuals seek some sort of safety net or lifeboat, which bonds and equities aren’t able to provide like they used.
Bitcoin Consolidates: Has the Bottom Been Reached Or Will There Be More Pain?
Bitcoin has gone down 5% in the last 24 hours but is still up 12% for the week. It started a downside correction from $24,200 and at the time of recording this video, was trading around $22,600. Bulls are still defending the $22,500 level. There is some resistance at $23,000 but if bitcoin manages to push through this level, the next major resistance is around $30,000. If bitcoin fails to maintain its gains, the price could drop further and trade below the $22,500 level again.
While some analysts believe that the bitcoin bottom has been found or is close, it’s important to remain cautious given the economic headwinds and extreme hawkishness of the Federal Reserve, and as of recently also the European Central Bank.
