Crypto-friendly US senator invites Elon Musk to move to Wyoming
Saying the state has "the best laws for digital assets" in the United States, Senator Lummis asked the Tesla CEO if he would consider relocating.
Following Tesla’s groundbreaking Bitcoin announcement, pro-crypto Senator Cynthia Lummis set out the welcome mat for Elon Musk in her home state of Wyoming.
Taking to Twitter yesterday, Lummis invited the Tesla and SpaceX CEO to consider relocating to “one of the most business friendly states” with “the best laws for digital assets” in the United States. The offer followed the news that Tesla had purchased $1.5 billion in Bitcoin (BTC) and would be accepting the crypto asset for payments.
Lummis' press secretary Abegail Cave told Cointelegraph that the state had developed a regulatory framework that rewarded innovation, particularly in the digital asset space. She cited a number of incentives that could potentially draw the Tesla CEO to Wyoming, including having no corporate or personal state income tax.
"Tesla is all about innovation, and it's great to see this American success story recognizing the value of digital assets," said Cave. "Should Elon Musk or his companies ever need a new home, they couldn't find a better place than Wyoming.”
Wyoming is becoming one of the most attractive U.S. states for crypto and blockchain firms. In September, the Wyoming State Banking Board granted crypto exchange Kraken a charter to operate as a crypto-friendly bank. The following month, regulators gave Avanti Bank & Trust the green light to receive and custody crypto in a similar fashion.
Both firms and others looking to Wyoming as a regulatory safe haven have been assisted by efforts from Caitlin Long, a former Wall Street executive and current CEO of Avanti Bank. Long, associated with the Select Committee on Blockchain, Financial Technology and Digital Innovation Technology in the state legislature, has helped enact many blockchain-enabling laws in Wyoming.
Less than a month into her first term as a U.S. senator, Senator Lummis said she will focus on legislating digital assets. Last week, she was assigned to the Banking Committee, responsible for financial regulation in the country.
Tesla's $1.5B Bitcoin purchase leaves treasury experts scratching heads
Some treasury experts are finding it difficult to understand why Tesla recently bought $1.5 billion worth of Bitcoin — the best performing asset of the last decade.
Corporate treasury commentators are criticizing Tesla's $1.5 billion Bitcoin splurge, echoing the well-worn rhetoric of BTC’s volatility.
Speaking to Financial Times, Jerry Klein, managing director at New York-based investment management firm Treasury Partners said that there was no use case for plowing corporate cash into Bitcoin.
Another critic quoted by FT, Campbell Harvey of Duke University in Durham North Carolina, called Tesla’s Bitcoin acquisition “unusual” and “risky” adding that it will not serve as a hedge against market uncertainties.
Critics of Tesla’s Bitcoin purchase say the move potentially puts shareholders at risk given the volatility of Bitcoin. Some point to historical crashes like the 2018 bear market and the 50% dump that occurred on Black Thursday in March 2020.
However, these arguments seem to leave out Bitcoin’s established “no look-back price trajectory” wherein each crash does not revert to a price level before the previous all-time high.
Also, Bitcoin’s parabolic bounce from its lows does not appear in these anti-BTC arguments. For instance, the Black Thursday crash of 2020 was followed by an almost eight-fold increase by the end of the year.
Since August 2020, business intelligence firm MicroStrategy has been acquiring Bitcoin and has spent about $1.1 billion in buying 71,079BTC. At the current price, the company’s Bitcoin stash is valued at almost $3.3 billion — a 200% gain on its investments.
Bitcoin was the best performing asset of the last decade, gaining almost 9,000,000% and far outstripping all other asset classes. Indeed, as of the time of writing, only Bitcoin bought above the $47,000 price level is currently at a loss.
Speaking to CNBC, MicroStrategy CEO and Bitcoin bull Michael Saylor countered the volatility rhetoric, saying holding cash reserves amounted to a stable loss of 75% of their shareholder value over the last decade whereas investing in BTC offered a volatile appreciation that doubled every six months. According to Saylor:
“Companies that are converting their dollars into Bitcoin are taking a non-performing asset [cash] and they are turning it into the best performing asset. Bitcoin has been appreciating at something like 230% year after year for a decade […] I’d rather have a volatile appreciation at 230% a year than a stable depreciation at a rate of 15 to 20% a year.”
The billions of dollars in economic stimulus packages by major economies are also expected to exert further downward pressure on fiat currencies.
Apart from the backlash over Tesla’s Bitcoin investment, these corporate treasury critics also said that other companies will not be lining up to follow Tesla’s lead.
However, Tesla is only the latest in an expanding cast of public companies holding Bitcoin on their balance sheets. As previously reported by Cointelegraph, 1,400 firms signed up for MicroStrategy’s Bitcoin-buying bootcamp.
Indeed, Apple bull RBC Capital Markets recently clamored for the iPhone maker to follow Tesla’s example in buying Bitcoin. RBC even called on Apple to go a step further by creating a Bitcoin exchange.
The largest cryptocurrency by market capitalization is currently up almost 60% year-to-date.
Stablecoin flows hint at $50K Bitcoin after Tesla pump liquidates $500M in BTC shorts
Around $500 million worth of positions were liquidated within hours as the Tesla news caused Bitcoin to spike over $46,000.
Bitcoin (BTC) has extended its rally over $46,000 on Feb. 9, a day after a U.S. Securities and Exchange Commission (SEC) filing revealed that Tesla bought $1.5 billion worth of BTC. The price of Bitcoin immediately soared from around $39,000 to $45,000 across major exchanges on Feb. 8 after the news began to spread.
Mass Bitcoin liquidation
As the Bitcoin price initially rallied to $45,000, it caused $500 million worth of short positions to get liquidated.
The term liquidation in the Bitcoin futures market refers to when the price of BTC moves quickly in a short period beyond the liquidation prices of futures contracts.
For instance, if a trader borrows 10 times the base capital and trades a $100,000 Bitcoin position with $10,000, the position would get liquidated after a 10% price movement.
According to the data from Bybt.com, $1.34 billion worth of futures positions in the futures market were liquidated in the past 24 hours.
This indicates two trends; first, the derivatives market was extremely overcrowded with short-sellers. When the Tesla news broke, it caused a massive short squeeze, liquidating hundreds of millions of dollars worth of positions in several hours.
Second, it shows that many investors did not anticipate Tesla to actually invest in Bitcoin even after Musk changed his bio to “Bitcoin” on Jan. 29, 2021.
What happens next?
Meanwhile, cryptocurrency traders are cautious due to the extremely high funding rates across major futures exchanges.
Funding rates increase when the majority of the market are buying or longing Bitcoin. When the funding rates are overly high, the market is vulnerable to a long squeeze, which can cause an intense short-term drop.
Nevertheless, a cryptocurrency trader known as “Loma” says that the market is not overconfident just yet. He said that when a point comes where traders are overly confident and do not expect a major drop, that is when a correction is likely to occur. He said:
“I want us to get to that point where people start talking about how it’s impossible for us to retrace 70-90% before I think of closing my spot $BTC positions. I remember feeling like there’s no way $BTC goes back below $10k in 2018. We went to ~$3,500. Never say never.”
Meanwhile, CryptoQuant CEO, Ki Young Ju, emphasized that there is newfound buyer demand as stablecoin inflows into exchanges were spotted. In the near term, this would likely act as a catalyst for Bitcoin. He wrote:
“You can call me crazy, but I think we'll see 50k soon. Just got another stablecoins deposit signal.”
Bitcoin's Twitter-volume spikes to new all-time highs on Elon pump
Elon Musk has pushed Bitcoin’s social sentiment into new highs on Twitter
Social media activity for Bitcoin is at an all-time high following a massive endorsement from Tesla CEO, Elon Musk.
Speaking to Cointelegraph, co-founder and CEO of crypto data provider The TIE, Joshua Frank, noted there have been 143,000 tweets over the last 24 hours from “non-bot accounts.”
The new record beats out the previous high of 140,000 from Jan. 3, 2021.
On Feb. 8, news that electric vehicle maker Tesla had added Bitcoin to its balance sheet sent prices and market sentiment to record highs. BTC prices hit an all-time high of $47,500 in early Asian trading on Feb. 9.
Frank described the surge in social engagement as evidencing bullish sentiment among retail traders:
“I think that it's definitely clear that retail is here. We are seeing absolutely massive surges across the board in twitter activity, trading activity, and price movement for altcoins which institutions are not touching. Today's movement can absolutely be attributed to Elon Musk, but BTC social activity has been on a tear all year.”
Musk’s tweet appears to have captured crypto-Twitter’s attention away from CME’s highly anticipated launch of Ether futures contracts on Feb. 8, with Frank noting that Ether’s Twitter-volume had slumped by half after recently enjoying sustained record highs:
“ETH twitter activity was crushing all-time highs recently but wasn't massive today, down about 50% vs. yesterday,” he said.
The run-up to the launch of CME’s Ether futures captured the imaginations of both institutional and retail traders alike, with ETH products representing 80% of last week’s institutional crypto inflows.
Both Ethereum and Bitcoin’s prices are currently cooling after posting new record highs earlier today. As of this writing, the combined crypto market capitalization is sitting at $1.4 trillion.