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Bitcoin and other cryptocurrencies plunge on Elon Musk tweets

FUERSTENWALDE, GERMANY - SEPTEMBER 03: Tesla head Elon Musk arrives to have a look at the construction site of the new Tesla Gigafactory near Berlin on September 03, 2020 near Gruenheide, Germany. Musk is currently in Germany where he met with vaccine maker CureVac on Tuesday, with which Tesla has a cooperation to build devices for producing RNA vaccines, as well as German Economy Minister Peter Altmaier yesterday. (Photo by Maja Hitij/Getty Images)
Elon Musk sparked concern that Tesla could sell its holdings of the cryptocurrency, before later clarifying that the electric vehicle company had not sold any bitcoin. Photo: Maja Hitij/Getty Images

The price of bitcoin (BTC-USD) crashed to its lowest level since the end of February after Elon Musk sparked concern that Tesla (TSLA) could sell its holdings of the cryptocurrency.

Last night a Twitter account called CryptoWhale tweeted: “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

Musk responded to the tweet with the word “indeed”, which caused bitcoin and other cryptocurrencies to plummet. However, later he clarified that the electric vehicle company had not sold any bitcoin.

Bitcoin tumbled as low at $42,212.56, according to figures from Coindesk, a far cry from the highs of $64,000 per coin last month. It is currently down 8% at $44,991, and has fallen more than 20% in the last seven days.

Read more: Why Elon Musk's bitcoin and dogecoin tweets don't break rules

Ethereum (ETH-USD), the second largest cryptocurrency, and Ripple (XRP-USD) have both likewise dropped 8% on the back of the news, while Dogecoin (DOGE-USD) is 5% lower.

Overnight, Musk also tweeted a reply to journalist and podcaster Peter McCormack, who posted a Twitter thread about Musk’s criticism of bitcoin and support for dogecoin. Musk said: “Obnoxious threads like this make me want to go all in on Doge.”

Bitcoin tumbled on Monday on the back of Musk's comments. Chart: Yahoo Finance
Bitcoin tumbled on Monday on the back of Musk's comments. Chart: Yahoo Finance

The comments come after Musk criticised bitcoin’s environmental impact last week.

On Wednesday evening, he raised concerns about how much energy the technology uses. According to Cambridge University, bitcoin mining accounts for 0.7% of the world's electricity consumption.

"We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially after coal, which has the worst emissions of any fuel," Musk tweeted.

The Tesla boss reversed a decision made just months before to accept bitcoin as payment for his electric vehicles.

However, the billionaire later said he still "believes in crypto" but remains concerned about bitcoin's energy usage.

"To be clear, I strongly believe in crypto, but it can’t drive a massive increase in fossil fuel use, especially coal," Musk said on Friday.

Read more: How bad is Bitcoin for the environment?

"It is important to keep in mind that it is true that the current sell-off in bitcoin price is mainly due to Elon Musk. But the reality is that bitcoin lost its upward momentum a long time ago, and this is because all that positive news about bitcoin failed to push prices higher,” said Naeem Aslam, analyst at Think Markets.

“It was clear that bitcoin prices went too far, and a correction was due. This correction is taking place now, and it is likely that we may see the bitcoin price decline further. The near-term support for Bitcoin is near the 38K price level.”

Bitcoin and cryptocurrency prices have surged since last October thanks to increased institutional adoption.

Popular exchange Gemini announced support for dogecoin last month, after eToro also added it to its online trading app. Meanwhile, Citigroup (C) was reported to also be weighing the option of providing cryptocurrency-related services after a surge in interest from its clients.

Watch: What is bitcoin?

The bank has not yet decided if it will offer clients these services, but trading, custody, and financing are all under consideration, the Financial Times said last week, citing Itay Tuchman, the bank's global head of foreign exchange.

However, some analysts have said the crypto rally was approaching bubble territory.

Bank of England (BOE) governor, Andrew Bailey recently also downplayed the rising value of cryptos. Bailey said cryptocurrencies have no "intrinsic value" and people who invest in them should be "prepared to lose all [their] money."

The governor's comments echoed similar warnings from the UK's financial watchdog.

Watch: What are the risks of investing in cryptocurrency?