Many Bitcoin proponents have preached that the asset could reach as much as $100,000 or more in 2021.
The volatility in Bitcoin’s price from misguided news headlines and Elon Musk’s Twitter escapades shows how little most understand the space.
In reality, the FBI found the wallet because it was stored online or on an exchange.
Many Bitcoin enthusiasts would say that no company or individual has the power to sway the price so heavily, but the correlation is too close to ignore.
What Musk and Tesla missed was that studies have shown that 76% of miners use some degree of renewable energy in their facilities and that 39% of all mining is done entirely with renewables.
While Tesla blamed Bitcoin’s energy use for its decision, there could have been an ulterior motive.
One of the most popular, and so far accurate, ways to track Bitcoin’s price has been its stock-to-flow ratio.
The amount of Bitcoin rewarded to miners is reduced by half every four years, lowering the incoming supply and availability of Bitcoin on exchanges, making them harder to find.
Deviations below the line have been caused by uncertainty in the marketplace about regulation, centralization, security and now environmental concerns.
Now, the question is whether or not Bitcoin will realign itself with its stock-to-flow ratio.
This means that residents of the nation would be able to transact Bitcoin without capital gains taxes and that the government will accept Bitcoin for USD and vice versa.
After this announcement, several leaders and politicians throughout Latin America called for similar action.
In what felt like a cascade of falling dominoes, politicians from Panama, Brazil, Mexico, Argentina and more all began to come out in support of adopting Bitcoin as legal tender in their respective countries.
While only El Salvador has made the move of adopting Bitcoin as legal tender, any further adoption would be significant for Bitcoin.
If the stock-to-flow model is still intact, the recent slump could delay the top of this cycle until later in the fall instead of mid-August, as the model suggests.
The unfortunate reality is that Bitcoin, as well as the crypto markets in general, seem extremely reactionary to news, even if the news doesn’t have much merit.
That said, last month’s negative news seems to have been reversed toward a positive narrative, one about banking the unbanked Latin American region of the world and providing financial inclusivity for its people.