How The 'Elon Effect' Has Affected The Bitcoin Market So Far

The ongoing market bloodbath in the Crypto-industry has left many wondering how some of the highest losers, which includes Bitcoin, will survive going forward. Usually, a bear market is perceived as a regular phase for digital currencies, but since Bitcoin largely benefitted from Tesla’s support, there are valid reasons to question Bitcoin’s stability going forward.

After Tesla suspended Bitcoin payments from its EV buyers due to energy consumption concerns, the market has lost a fortune up until the time of this writing, with over $300 billion wiped from the crypto market.

The “Elon Effect”

Tesla had an undeniable impact on the price of Bitcoin and its overall adoption. When the company announced its $1.5 billion worth of Bitcoin purchase, Bitcoin bulls were off the charts as prices soared instantly. Despite Bitcoin dropping to lower levels that week, and analysts predicting that there was room for the asset to drop lower, the “Elon Effect” sent Bitcoin back up to $44,200.

When Tesla’s Bitcoin bet paid off, as the electric vehicle company recorded the highest quarterly report it had seen since its creation: a whopping $438 million in profit, a large amount of which came from the company’s Bitcoin investment, analysts’ noted that institutions may have been given more reasons to buy Bitcoin for their company reserve in the future.

The tradition of miners selling their Bitcoin holdings took a U-turn, as Glassnode revealed that top market participants may have been influenced by Musk’s Bitcoin holdings, to also accumulate for a longer period of time.

BTCUSD Chart By TradingView

Can Bitcoin shake it off?

While Bitcoin had been faring well before Elon Musk’s endorsement, institutional adoption from a leading company like Tesla is part of what analysts point at, when they imply that mass adoption will send Bitcoin to the moon. And although Tesla affirmed that it will not sell its current Bitcoin holdings, its decisions may impact other institutions that may have been eyeing the market to pull back a little.

It is evident that Bitcoin thrives on the pillars of institutional support amongst other factors, but for this very reason, it is almost inevitable that Bitcoin will bounce back. For one, hungry whales are tapping into the dip as a buying opportunity. Institutions like Microstrategy have also joined in as it recently bought $15 million worth of Bitcoin.

For proponents like Jack Dorsey who strongly believe that Bitcoin is an environmentally-friendly asset, it will come as no surprise that more campaigns pushing that narrative will erupt.

Asides from these backings, this event is an opportunity for Bitcoin to prove itself once again, as a cryptocurrency designed to stand the test of time. The CEO of Binance implied this in a tweet where he wrote:

“I like the prices in a bull market, but I actually like projects in the bear market a lot more. Felt healthier.”