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Bitcoin drops after report Binance under U.S. probe, Tesla move

ForexMay 13, 2021 08:24PM ET
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© Reuters. FILE PHOTO: A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken January 8, 2021. REUTERS/Dado Ruvic

By Kevin Buckland, Elizabeth Howcroft and Gertrude Chavez-Dreyfuss

NEW YORK/LONDON/TOKYO (Reuters) - Bitcoin slid to a 2-1/2-month low on Thursday after a regulatory probe into crypto exchange Binance added to pressure from Tesla (NASDAQ:TSLA) Inc chief Elon Musk's reversing his stance on accepting the digital currency.

Bloomberg reported on Thursday that as part of the Binance inquiry, the U.S. Justice Department and the Internal Revenue Service have sought information from individuals with insight into its business.

Bitcoin dropped to $45,700, the lowest since March 1, then steadied at $49,312 in Asia morning trade on Friday.

The world's largest cryptocurrency fell 17% on Wednesday following Musk's remarks that Tesla would stop accepting the digital token as payment for its electric cars for environmental reasons.

"Environmental matters are an incredibly sensitive subject right now, and Tesla's move might serve as a wake-up call to businesses and consumers using bitcoin, who hadn't hitherto considered its carbon footprint," Laith Khalaf, an analyst at AJ Bell, said.

Bitcoin remains about 70% higher for the year and is more than 1,000% higher than its 2020 low of $3,850.

Binance did not immediately respond to a request for comment. A Binance spokeswoman told Bloomberg that the company doesn't comment on specific inquiries but takes its legal obligations seriously and engages with regulators in a collaborative fashion.

Ethereum, the second-largest cryptocurrency, dropped to a session low of $3,543.62 and last changed hands at $3,656, down about 4%. On Wednesday, ethereum hit a record high of $4,380.64.

Tesla's announcement on Feb. 8 that it had bought $1.5 billion of bitcoin and would accept it as payment for its electric vehicles has been one factor behind the digital currency's surge this year.

Musk has faced pressure over bitcoin's environmental impact. The cryptocurrency relies on computers competing to solve elaborate math problems, which use huge amounts of electricity.

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

Musk's comments roiled markets even though he said Tesla would not sell any bitcoin and would resume accepting it as soon as "mining" for it transitioned to more sustainable energy.

In a second tweet on Thursday, Musk denounced the "insane" amount of energy used to produce bitcoin, which pushed bitcoin lower.

Jeffrey Wang, Vancouver-based head of Americas at Amber Group, a cryptocurrency service provider, said broader selling of risk assets in traditional markets was another factor behind Wednesday's bitcoin plunge.

"I don't think everything is selling off just because of this news. This was kind of the straw that broke the camel's back in terms of adding to the risk sell-off," Wang said.

Bitcoin has struggled since hitting a record $64,895.22 in mid-April, dropping to the cusp of $47,000 just 11 days later before hovering around $58,000 since the start of May.

Graphic: Bitcoin falls sharply after Musk tweet - https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjmbdwpr/Bitcoin.png

ENVIRONMENTAL CONCERNS

At current rates, bitcoin mining devours about the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency showed.

Tesla shares were down 2.4%, while the biggest U.S. cryptocurrency exchange, Coinbase, tumbled nearly 9%. Smaller cryptocurrencies were less affected by the news.

"The reason given in the tweet is fossil fuel use for the mining of BTC, but most cryptocurrencies have already found more efficient ways to do that and therefore outperformed."

Cryptocurrency dogecoin lost more than a third of its price on Sunday after Musk, whose tweets had stoked demand for the token earlier this year, called it a "hustle" on the "Saturday Night Live" comedy show.

By Tuesday, however, he was asking his followers on Twitter if they wanted Tesla to accept dogecoin and it jumped on Friday in Asia after Musk tweeted about it again and said he was working on improvements to its transaction systems.

Dogecoin rose 20% to 52 cents on Friday according to Binance and last traded at $0.4825.

Bitcoin drops after report Binance under U.S. probe, Tesla move
 

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Comments (28)
Eudon Hickey
Eudon Hickey May 14, 2021 12:37AM ET
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Environmental issues, like face mask everywhere now, baby diapers, plastic bags....or just simple energy, that btw- as Elon is so concerned, why not sponsor his solar energy to miners?
taylor jason
taylor jason May 14, 2021 12:37AM ET
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do you really belive that's actually the reason?
Fabian Mbonu
Fabian Mbonu May 13, 2021 11:46PM ET
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the biggest mistake one can make..is regret!
Investing Man
Investing Man May 13, 2021 11:41PM ET
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Crypto is greener than driving greenbacks all over town to stores and atm machines lol
Drupal Grupal
Drupal Grupal May 13, 2021 7:42PM ET
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biggest risk I see is what happened to the gasoline transport network when colonial pipeline was hacked. they were paid using Bitcoin. that kind of publicity is very bad and could prompt regulations. terrorists can use cryptos to finance attacks.
Rohit Jain
Rohit Jain May 13, 2021 6:54PM ET
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Pied piper of hamlin
yee peng
yee peng May 13, 2021 6:25PM ET
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Dump when a pax needs it and will not accept it.Who wants to follow him?
Alan Rice
Alan Rice May 13, 2021 6:25PM ET
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Crypto Target : Worthless ??
Kevin Shaughnessy
Kevin Shaughnessy May 13, 2021 4:07PM ET
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Onerous regulation on the way... Colonial one pipeline to far
Drupal Grupal
Drupal Grupal May 13, 2021 4:07PM ET
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my thoughts exactly
Someting Wong
Someting Wong May 13, 2021 1:32PM ET
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Master Manipulator extrodinair
Alan Rice
Alan Rice May 13, 2021 1:24PM ET
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It must have been time to short. EVs are the poster child of greenwashing.
Jack Zydron
Jack Zydron May 13, 2021 9:15AM ET
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And well it should, 1 bit coin transaction requires more power than 755,000 visa transactions or streaming 55,000 hours of YouTube. It an environmental disaster and benefits those who want to hide money for good and bad purposes. ponzi scheme fueled by algorithms of Facebook and Google.
Todd Miller
DoubleDuece May 13, 2021 9:15AM ET
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False
Vv Pp
Vv Pp May 13, 2021 9:15AM ET
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do your homework again
James Pattison
James Pattison May 13, 2021 9:08AM ET
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As he launches a space x rocket withba tesla strapped to it into orbit... he probably jist wanted to add a few more million btc into the portfolio and wanted a discount
Ruud Gullitt
Ruud Gullitt May 13, 2021 9:08AM ET
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it had never croseed his mind before this week..
Gus Con
Gus Con May 13, 2021 8:53AM ET
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Tesla runs on the same electricity used to creat Bitcoin. Dump Tesla
Ruud Gullitt
Ruud Gullitt May 13, 2021 8:53AM ET
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dump. agree. a tool who is greedy.
Mart Bab
Rubberduck1973 May 13, 2021 6:17AM ET
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Somebody should also investigate Elon for insider trading. In my opinion, he is earning a lot of money with prazing or bashing crypto
Investing Man
Investing Man May 13, 2021 6:17AM ET
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Maybe not him, but the banks clueing him in for sure
Mart Bab
Rubberduck1973 May 13, 2021 6:15AM ET
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There goes your hedge against inflation theory. It seems the only thing defying the price of Bitcoin and other crypto is mr. Elon Muskito. In my opinion, dump all crypto except for Ripple. Ripple will in the end become the interbanking money transfer system of the future
Investing Man
Investing Man May 13, 2021 6:02AM ET
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Its hilarious eco na zis qqq about green with crypto... have any clue how much it takes to drive cash to atm machines, casinos, stores, and banks lmao.
Ruud Gullitt
Ruud Gullitt May 13, 2021 6:02AM ET
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do the math
Charry Shiko
Charry Shiko May 13, 2021 5:03AM ET
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maybe he wants the price to go low so that he can buy more
Investing Man
Investing Man May 13, 2021 4:53AM ET
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When stocks become popular on media that usually means institutions are about to raid them them and leave you as bag holders. I fear crypto, held by the same people who run those institutions, have reached that same point. Its day was end of last year.
Rodolfo Barraco
Rodolfo Barraco May 13, 2021 4:31AM ET
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This goes way beyond elon. Just one more drop into the ocean
Simon Meszaros
Simon Meszaros May 13, 2021 4:26AM ET
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falcon heavy goes oon orbit on kerosene, i am not proponent of btc, rather etc, but this is definitely problem of the crowd not musk.
Rodolfo Barraco
Rodolfo Barraco May 13, 2021 4:26AM ET
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Elon is inconsistent like that. Probably sold btc to buy back tesla dips. Then tweeted to create a btc dip snd re buy those btc
Jan Buyle
Jan Buyle May 13, 2021 3:19AM ET
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Elon Musk is a market manipulator. And he does that for his own benefit, not for yours. Can't you see how he is playing with the easy to lead crypto crowd?
Rodolfo Barraco
Rodolfo Barraco May 13, 2021 3:19AM ET
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Where is the sec???!!
Investing Man
Investing Man May 13, 2021 3:19AM ET
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He prorbably thought there was more institutional interest willing to buy at 60,000 per coin. Realizing there isnt, hes shifting to coins that have more opportunity for average people.
Eudon Hickey
Eudon Hickey May 13, 2021 3:13AM ET
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Elon has a history of silly tweets.I believe the crypto community needs to move on, do your own reaearch and believe in your picks(not all famous& tv personalities).
Joel Schwartz
Joel Schwartz May 13, 2021 12:29AM ET
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Short Tesla down to $550 this week with me. Musk keeps pumping and dumping on retail.
Jack Zhang
Jack_A May 13, 2021 12:29AM ET
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Previouly Trump, now Musk, is manipulating the market!!! Tesla probably has sold all coins at highs!
perplexed76 .
perplexed76 . May 13, 2021 12:02AM ET
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this guy reminds me trump: they both can say contradictory statements  in a short period
Edward Chong
Edward Chong May 13, 2021 12:02AM ET
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trump and musk are best of pals not known to the public.
 
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