Crypto & DeFi Market Continues to Consolidate for “Good Reasons,” Elon Musk’s Tesla Now Accepts Bitcoin

The electric car maker operates Bitcoin nodes directly and will hold the BTC received as payment instead of converting to fiat currency. BTC price spiked but sticks to sideways action.

The price of Bitcoin went green to above $56,700 after Elon Musk announced that Tesla will now start accepting the cryptocurrency.

Tesla CEO tweeted that “you can now buy a Tesla with Bitcoin” and that the same option will be available to customers outside the US later this year.

Last month, the electric car maker disclosed that it has invested $1.5 billion in Bitcoin and shared that soon it will start accepting the crypto as well.

Musk further said on Wednesday that any Bitcoin that they will receive will be kept and won’t be converted to fiat currency.

“Tesla is using only internal & open source software & operates Bitcoin nodes directly. Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency,” said Musk.

Even Microsoft is asking Xbox users about Bitcoin as a payment method while Federal Reserve Chairman Jerome Powell says Bitcoin’s highly volatile nature means they're “not particularly in use as a means of payment.”

According to Powell, Bitcoin is a speculative asset, which “is essentially a substitute for gold rather than for the dollar.”

Sideways Action

About 10 days back, the price of Bitcoin hit its all-time high at nearly $62k, and ever since then, it has been consolidating. This week, the prices of the trillion-dollar asset went down to $52,700.

However, institutions seem to continue to buy the dips as 9,077 BTC were withdrawn from US-based Coinbase in a single transaction.

Much like Bitcoin, the rest of the market, including DeFi, is in consolidation. For more than a month, the total market capitalization is between $1.5 and $1.8 trillion, and the DeFi sector’s market cap is between $80-$90 billion, as per CoinGecko.

There are many “good reasons” for this; in fact, “It would actually be weirder if the market was not moving sideways,” said Kain Warwick, founder of Synthetix, a DeFi derivatives liquidity protocol.

He points out how the ‘institutions are coming’ narrative in the Bitcoin market has been paid off. As for Ether, the impending EIP1559 launch, multiple L2 launches, and the shift to PoS all have “significant execution risk and could easily be delayed.” People are basically sitting on the sidelines, he added.

On the DeFi side, its market conditions are “significantly tied to the successful adoption of L2 scaling across the ecosystem,” which is going to take time, 3-6 months, or even longer.

While the market has Uniswap V3, Balancer V2, and Synthetix V3 coming, there’s a lot of execution risk here as well.

“The end result of all of these upcoming risks is basically time. How long does it take for all of this to shake out. That’s what’s causing the uncertainty,” said Warwick.

More Stimulus

The bullish thing for Bitcoin and risky assets is the stimulus Americans have started receiving and are planning to invest in them. However, it isn’t an end to the stimulus yet.

After the $1.9 trillion pandemic relief package signed into law this month, President Joe Biden’s economic advisers are now pulling together a $3 trillion package to boost the economy, narrow economic inequality, and reduce carbon emissions.

Reportedly, the proposal is expected to be presented to the president and congressional leaders this week.

“These people are determined to send bitcoin to the moon,” commented analyst Mati Greenspan. “Between the free money from the government and a never-ending bull run, I'd imagine that many of us are making out like bandits.”

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