Elon Musk's SpaceX sells $373 Million in BTC
Before we dive into the why, understanding what cryptocurrency is can help put the whole story into context-
In the ever-fluctuating world of cryptocurrencies, the price of Bitcoin (BTC) experienced a significant nosedive in the past week, plunging to below $26,000 — the lowest it has been since June. Adding to this, the price slump was not an isolated event. Other major cryptocurrencies such as Ether, Binance Coin, Cardano, and Solana followed suit, dropping significantly as well.
What You Need to Know About Crypto
Before we dive into the why, understanding what cryptocurrency is can help put the whole story into context. At its heart, cryptocurrency is a digital asset that operates via blockchain, a database that maintains a list of records, each called a block. This block contains highly secure data, enabling each cryptocurrency transaction to be recorded and protected.
Over time, cryptocurrencies have been accepted as legitimate forms of currency and even recognized as valid modes of payment in some countries across the world. They involve complex mathematical algorithms to keep them functioning at a high level of security. And as cryptocurrencies gained popularity over the last few years, numerous resources, such as cryptocurrency help which simplify the intricacies behind the technology, came into play. Many of them cover topics ranging from what cryptocurrency actually is and how to buy them, to detailed articles that cover how different cryptocurrencies in the market can impact each other.
Coming back to the crux of this story — to understand the mechanics behind this downward spiral in cryptocurrency’s value, it is important to look into two aspects. The first is the general state of the crypto market in the past few months, and the second is what SpaceX, a privately owned American spacecraft manufacturer, did.
Cryptocurrency is typically a volatile asset. Although its value has skyrocketed since it was first introduced, it highly fluctuates across short periods of time. However, over the last few months, the crypto market has been relatively stagnant. Trading slowed down, meaning any transaction of a big amount, typically from an individual or establishment with a large holding, would have a greater impact on the market and its valuation than it would under normal conditions.
This is where SpaceX’s decisions come in.
How Did SpaceX Affect BTC?
By design, cryptocurrencies are decentralised, meaning they are not under the control of a singular body. However, as mentioned earlier, a few key market players, like the man behind SpaceX — Elon Musk — are an exception to this rule. Musk is well-known for his ability to make unpredictable business decisions, especially following his purchase of Twitter (now known as X) last year. These decisions are crucial in how he impacts both the stock and crypto markets.
On Thursday, August 17, Wall Street Journal published a report stating that SpaceX had written down the value of its bitcoin holdings by a staggering $373 million over the past 2 years. Moreover, the report also indicated that SpaceX had conducted a sale of an undisclosed portion of these holdings, the timing of which is unknown.
Elon Musk and his unanticipated corporate decisions have historically driven remarkable fluctuations in cryptocurrency prices, even with his tweets triggering market shifts. It is worth noting that SpaceX is not Musk’s first company to make this move — Tesla, the pioneering electric vehicle manufacturer under his leadership, revealed in a report of its previous year’s earnings that it had liquidated 75% of its Bitcoin holdings
Writing down $373 million of its BTC investments might seem like SpaceX now has $373 million in cash. However, it is important to note the distinction between writing down and selling off since this misconstrual is what caused the market to dip in the first place. Some publications took writing down to mean that SpaceX has sold its Bitcoin holdings worth $373 million, leading to a steep drop in Bitcoin’s value.
But how does marking down the cryptocurrency impact the company’s position? Writing down, or marking down, the value of an asset, in this case — Bitcoin — is not the same as selling it. As a standard accounting procedure, companies often reduce the value of an asset when they predict an upcoming devaluation. This reflects on the company’s balance sheet to give its investors a clear picture of the company’s overall financial health.
In light of publications releasing this narrative, some major news outlets came out with the truth — not only did Musk retain some of his investments in the cryptocurrency market, but also that China’s second-largest real estate developer had a crucial role to play in the crypto market’s decline. The Evergrande Group globally shook markets, including the crypto market, when it filed for bankruptcy and resulted in the downward spiral.
In essence, while Elon Musk did not single-handedly cause the crypto market to decline, he did play a major role. His actions have consistently dictated the rise and fall of the stock and crypto market, making investors wary of or closely following his every move, especially in markets as volatile as the cryptocurrency one. Over time, these actions serve as a reminder of how even one individual can cause a global market to shift.