21 Dec 2020 · 4 min read

BTC Drops Below USD 23K While Investors Watch Elon Musk, New Stimulus, and Crackdown

A Twitter exchange between two of the United States’ prominent businesspeople has possibly added fuel to the bitcoin (BTC) rally this weekend, while the US announced a new coronavirus stimulus package and a regulatory crackdown. However, the rally ended on Monday morning (UTC time), with BTC dropping below USD 23,000. (Updated at 10:43 UTC to add the latest price data).

Elon Musk. Source: A video screenshot, Youtube, Bloomberg.

At the time of writing (10:42 UTC), BTC trades at USD 22,796, correcting lower from USD 24,000 reached earlier today. The price is down by almost 3% in a day, trimming its weekly gains to 19% in a week. It's also up by 22% in a month and 217% in a year.

Tesla chief Elon Musk had a very active weekend on the social media platform, brewing a storm by tweeting, “Bitcoin is my safe word,” later writing:

“Just kidding. Who needs a safe word anyway?”

He then posted “sounds about right” in agreement to a tweet suggesting that a BTC price crash was looming, and that bitcoin would eventually reach the USD 50,000 mark in the next five years.

On Reddit, some suggested that Musk may have been “trolling” Twitter users with his posts.

But things intensified again when another Musk-tweeted BTC-themed post, this time a meme, led Michael Saylor, the head of software giant MicroStrategy – a firm that has dominated headlines this year with its corporate bitcoin-buying strategy worth some USD 1.3bn thus far – to get involved.

He wrote in response to Musk,

“If you want to do your shareholders a USD 100 billion favor, convert the Tesla balance sheet from USD to BTC. Other firms on the S&P 500 [index] would follow your lead, and in time it would grow to become a USD 1 trillion favor.”

Tesla is due to start trading on the index today, and Musk duly responded by asking Saylor if “such large transactions” were “even possible.” Saylor replied by stating that he would be happy to share his “playbook” with the Tesla chief.

Whether or not the exchange did have an effect on BTC prices is unknown, but major news agencies like Reuters and Bloomberg appear to have helped its cause by reporting on the story.

'$600?!?!'

Meanwhile, other USA-related developments may also have had a ripple effect on the markets. The New York Times reported that the House of Congress has finally agreed on terms on a USD 900bn aid package that will see companies and individuals in the country receive more cash handouts from Washington. Individuals are in line to get USD 600.

On Twitter, some claimed that giving out cash to America’s middle classes while “continuing to pump billions into the markets via the Federal Reserve and Treasury” was misguided.

Others suggested that cash is “trash” and that BTC giveaways would be better than fiat payouts.

Podcaster and bitcoin advocate Anthony “Pomp” Pompliano, the Co-founder and Partner of Morgan Creek Digital Assets, also opined that “waiting for politicians to come save you” was a bad idea as the coronavirus pandemic continues to disrupt the global economy. He suggested that the United States government was wrong to assume that “the average American can survive a global pandemic and economic crisis on USD 1,800.”

Other crypto players took mocking aim at the withering status of fiats like the USD.

'Transparency' vs. surveillance

But there are suggestions that the American Treasury will not sit idly by as bitcoin rockets and conventional currencies slump.

Bloomberg also reported that the finance department has now formulated a plan that will involve “cracking down on virtual currency transfers.”

In a press release, the department stated that it was wanted to act to “close anti-money laundering regulatory gaps for certain convertible virtual currency and digital asset transactions.”

The proposed rule, now in a 15-day consultation phase, would seek to force banks to scrutinize and report on crypto-related transactions in a bid to close financial “loopholes.”

Treasury Secretary Steven Mnuchin stated that the new measures would “increase transparency while minimizing impact on responsible innovation.”

As previously reported by Cryptonews.com, this new initiative might increase surveillance of the Bitcoin network.

The Treasury’s move drew instant ire from crypto industry chiefs. Bloomberg quoted Kristin Smith, the head of the Blockchain Association, as stating,

“The ability for individuals to engage in digital peer-to-peer transactions is the foundation of the crypto economy. Undercutting that ability with last-minute rulemaking in the twilight days of an outgoing administration is not the way to make the type of long-lasting, responsive regulations that will support the safe growth of this industry in the United States.”

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Learn more:
Crypto in 2021: Bitcoin To Ride The Same Wave Of Macroeconomic Problems