The price of bitcoin broke $40,000 Monday for the first time in weeks following another Elon Musk flex.
The Tesla CEO tweeted yesterday that the automaker will resume accepting bitcoin payments for vehicles when “there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend.” Musk’s tentative peace offering drove bitcoin up to a peak of almost $41,000 this morning, a 15% increase from the day before and a far cry from bitcoin’s flirtation with bear territory last week.
The rebound is a reminder of just how vulnerable this still-developing market is to the whims of self-appointed sages who, as some in the crypto market complain, don’t even have a track record of building crypto businesses.
In another attempt to woo the market, Musk said that at some point, Tesla sold about 10% of its $1.4 billion bitcoin stash only in order to confirm that the company could easily liquidate its holdings without moving markets. The admission follows accusations that Musk uses his platform to exert excess control over the market.
Image Problem
While the latest price surge might be a cause for celebration for crypto enthusiasts, the outsize influence Musk holds poses a dilemma for the sector. The fact that a small group of people dominates the narrative around bitcoin is at odds with the cryptocurrency’s core tenet that it is a decentralized system.
Of course, Musk isn’t the only person stirring up controversy in crypto. MicroStrategy CEO Michael Saylor makes regular headlines with boosterish comments and announcements that the software company is hoovering up even more bitcoin. (On Monday, MicroStrategy disclosed that it would use funds raised in a $500 million bond offering to buy bitcoin, another factor in the currency’s rebound.)
Musk’s and Saylor’s sway over crypto is a mixed bag, said Mike Green, chief strategist at registered investment adviser Simplify Asset Management, which offers an ETF that allows for some bitcoin exposure.
While their support helps bring positive recognition to bitcoin, Green said, their behavior also draws scrutiny that might not flatter the industry over the longer term.
Both Musk and Saylor have risen to such prominence in a sector when they are mainly known for expertise in other areas. That separates them from crypto power figures who are regarded as having earned their stripes as industry insiders.
Rival blockchain Ethereum, which shares bitcoin’s founding principle of decentralization, has a de facto leader in its wunderkind co-founder Vitalik Buterin. He has earned the admiration of crypto enthusiasts as someone who is more likely to publish a think piece than shoot off a midnight tweet.
Perhaps Musk and Saylor would have less influence if we knew more about bitcoin’s mysterious inventor. But maybe it just boils down to the biggest and boldest voices crowding out the rest.
The Price Is Right
A spotlight on up-and-coming crypto companies
FalconX
Based in: San Mateo, Calif.
Investors: Tiger Global, American Express Ventures, B Capital Group, Accomplice, Flybridge, Accel and others
Funds Raised: $67 million
What Sets It Apart: FalconX relies on machine learning to help financial institutions build crypto trading platforms with accurate pricing.
Founded in 2018, the company draws on and compares data from exchanges, over-the-counter trading desks and crypto miners to determine pricing.
“You have to reliably connect to all these different venues to understand what is real, what is fake, because, just like the internet, there’s no global regulation yet,” said Raghu Yarlagadda, FalconX CEO and co-founder.
FalconX, which also helps institutions with crediting and clearing, has been doing a lot of work with hedge funds that have grown more interested in crypto because of inflation fears, according to Yarlagadda.
The company has also experienced increasing interest from neobanks, which operate exclusively online.
“A lot of neobanks are getting told from their millennial customer base, ‘Hey we want crypto exposure,’” Yarlagadda said. He said that FalconX’s transactions volumes grew by at least 15 times and revenue increased 30 times in the past year.
Deal Watch
- Digital asset management firm Arrington Capital launched a $100 million fund to support projects on the Algorand blockchain. Algorand looks to bridge the gap between traditional and decentralized finance.
- Copper, a crypto custody firm based in the U.K., raised $25 million from hedge fund manager Alan Howard in an extension of its Series B funding round. Howard also invested $12 million in Kikitrade, an Asia-based cryptocurrency investment platform, following reports that he is going all in on crypto.
- BC Technology Group, which owns crypto exchange OSL, raised $70 million from GIC, Singapore’s sovereign wealth fund.
What We're Reading
- Bitcoin on the Balance Sheet Is an Accounting Headache for Tesla, Others (WSJ)
- ‘Covid Alien’ CryptoPunk NFT Sells for Over $11.7 Million in Sotheby’s Auction (CNBC)
- Taproot Activation Brings Massive Upgrades to Bitcoin (Bitcoin Mag)
