July 21, 2022

Bitcoin Slides but the Crypto Market Is Worth $1 Trillion Again. Even as Tesla Sells Out

[Barron’s, Getty Images]

A recent rally in cryptocurrencies lost speed on Thursday, with the price of BitcoinBTCUSD –2.97%  and other cryptocurrencies sliding back as investors digested news that Tesla TSLA +5.52%  had sold the lion’s share of its digital asset holdings.

The price of Bitcoin fell 3% over the past 24 hours to below $23,000, having advanced as far as $24,200 on Wednesday. The largest digital asset has given up some gains, but remains more than 15% higher from a week ago as a result of a rally that has brought the total market capitalization of cryptocurrencies back above $1 trillion. 

The crypto market cap topped out near $3 trillion in November 2021—when Bitcoin was almost three times more valuable than it is now—and bottomed near $800 billion in the depths of a selloff that reached its most severe point last month.

Digital assets remain down in the dumps after a price crash, but venture-capital funding in the space remains strong and fears of a new “crypto winter” have been tempered by optimism that the industry will consolidate and grow stronger.

Bitcoin’s latest declines come despite strength in the stock market. Cryptos should, in theory, trade independently of mainstream financial markets, but have shown themselves to be largely correlated with stocks, and especially tech stocks. The tech-heavy Nasdaq ended 1.6% higher on Wednesday and futures tracking the index implied more gains to come on Thursday.

One piece of downbeat news for the digital asset space came in tandem with earnings from Tesla (ticker: TSLA), the electric-vehicle giant run by high-profile crypto fan Elon Musk. Tesla sold about 75% of its 42,000 Bitcoins last quarter for around $30,000 each—roughly the same price it paid for the crypto in early 2021. 

Selling at those levels is an impressive feat considering the price of the token plumbed depths below $18,000 in the same three-month period—Bitcoin’s worst quarter since 2011, a year in which it crossed the $1 threshold for the first time. Tesla continues to own about $241 million worth of Bitcoin at current prices, but the recent sale—which helped it dodge losses upwards of $300 million from writing down its holdings—represents a high-profile capitulation during this turbulent period.

In other cryptos, EtherETHUSD –1.98% , the second-largest digital asset, fell 5% to $1,500. The token underpinning the Ethereum blockchain network has recently been outperforming Bitcoin, and is outpacing its larger peer’s declines as the current rally loses speed.

Among altcoins, or smaller cryptos, Solana dropped 9% and Cardano was 8% lower. Memecoins—initially intended as internet jokes—were similarly weaker, with DogecoinDOGEUSD –0.56%  and Shiba InuSHIBUSD –1.09%  shedding 7% and 8%, respectively.

By Jack Denton

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