Elon Musk tweeted on Feb 20, 2021, “Money is just data that allows us to avoid the inconvenience of barter. That data, like all data, is subject to latency & error. The system will evolve to that which minimizes both. That said, BTC & ETH do seem high lol”.
While a myriad of factors likely play into the drop in BTC and other cryptocurrencies’ prices, Elon Musk’s impact on BTC can not be ignored. On the one hand, he believes in bitcoin’s future. Tesla did buy $1.5 billion dollars worth of bitcoin. On the other hand, short-term volatility on cryptocurrencies happens constantly, creating market inefficiencies.
BTC dropped 19% in 16 hours today from $58,414 to $47,393. Part of this drop can be attributed to Elon Musk. Another factor is the forced liquidations on many exchanges, according to tracker Bybt.com. About $3.52 billion of cryptocurrency were liquidated in the past 12 hours.
Traders sometimes overleverage their positions, betting on bitcoin's price to go up. However, when bitcoin prices tank as we just saw, exchanges are forced to liquidate assets because traders lose the value of their collateral and fail to meet the borrowing requirements on their leveraged positions. However, these corrections tend to be considered normal, especially if assets increase dramatically in a short period of time. $1.6 billion of those liquidations were on Binance exchange, followed by Huobi and Okex. In the featured image, you can see $1.64 billion worth of total liquidations in the past hour were from BTC.
While this drop can be scary to new investors, we must look at the long game and consider the value BTC will have in revolutionizing the world. Do your own research as this is not financial advice, but at least for me, I had bought some more bitcoin on this dip.