When cryptocurrency headlines drown out rest of Wall Street

Elon Musk’s tweets see digital token holders going into a frenzy

Elon Musk announced that his company Tesla would no longer accept Bitcoin as a form of payment for its cars. Photo: Reuters

Wild stock swings, spikes in US Treasury yields, startling economic readings? Interesting, sure. But if you really want to get people’s attention right now, you need to tell them a story about cryptocurrencies.

And there have been a lot of those. Even for a market that’s famous for its wild volatility and gimmicks, the past week’s cryptocurrency news set new records for jaw-droppers.

It began with Elon Musk's highly anticipated appearance as host on Saturday Night Live. Dogecoin owners watched hoping that the "Dogefather" would further propel the digital currency that had soared this year from less than a penny to 74 cents before he took the stage.

What they got instead was a skit in which he laughed after calling the coin a “hustle”. Since then, the Shiba Inu-branded coin created as a joke has lost almost half of its value.

Dogecoin wasn’t the only canine-themed coin to take a tumble.

Shiba Inu coin – yes, a meta joke about the joke that is Dogecoin – soared earlier in the week as it was added to exchanges such as OKEx and Binance. It and other Dogecoin imitators’ popularity reached such heights that transaction fees on the Ethereum network hit an all-time high, according to CoinDesk.

The rally faded quickly. The cryptocurrency plunged on Wednesday after the Wall Street Journal reported that Ethereum creator Vitalik Buterin donated more than $1 billion of the coin to a charity that is fighting the spread of Covid-19 in India.

Then that night, Mr Musk struck again. He announced that Tesla would no longer accept Bitcoin as a form of payment for its cars. In a tweet, Mr Musk said that the car maker was "concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel".

While his tweet left Bitcoin holders wondering what spurred the change – the facts of the coin’s energy profile hadn’t changed since Tesla announced in March that it would accept it as payment – the market reacted swiftly. Bitcoin plunged from nearly $57,000 before his flip-flop to $46,000 within two hours.

Thursday brought some good news for crypto die-hards. Point72, the hedge fund run by billionaire New York Mets owner Steve Cohen, was set to make a sizeable move into the market. Bitcoin gained 2.5 per cent following the news.

The rally didn’t last long.

Tether, the crypto stablecoin that says it’s backed one-for-one by fiat currencies, released a reserves breakdown for the first time that showed a large portion in unspecified commercial paper. The company has faced questions over both its reserves and whether it was used to manipulate cryptocurrency prices.

In February, Tether settled a legal dispute with the New York Attorney General’s Office and paid a fine of $18.5 million.

After that, reports surfaced that Colonial Pipeline paid nearly $5m in untraceable cryptocurrency to the hackers that infiltrated the company’s network and forced the shutdown of its infrastructure, setting off widespread fuel shortages up the US eastern seaboard.

At about the same time, Bloomberg reported that Binance Holdings, the world's biggest cryptocurrency exchange, was under investigation by the US Justice Department and Internal Revenue Service in relation to possible money-laundering and tax offences.

News of the investigation sent Bitcoin and Ethereum, the two largest cryptocurrencies, down by more than 7 per cent each as fears were stoked about the Biden administration taking a tougher approach toward an industry that has largely operated outside of the gaze of regulators.

Then at 12am UAE time, Coinbase Global, the biggest US crypto exchange, reported first-quarter earnings. Its revenues fell just short of consensus estimates and the company projected flat user growth.

Coinbase also plans to offer Dogecoin trading on its platform. The exchange’s shares fell as much as 6.5 per cent in after-hours trading before recovering.

Friday is already bringing further drama, beginning with more comments from Mr Musk. The billionaire in a tweet said he “strongly” believes in crypto but that “it can’t drive a massive increase in fossil fuel use, especially coal”.

Not long after, he followed up with another post saying that he’s working with Dogecoin “devs to improve system transaction efficiency”, describing the effort as “potentially promising”.

Dogecoin jumped more than 20 per cent after the tweet.