Graeme Wearden 

Bitcoin at February lows after Musk tweets; AT&T merging WarnerMedia with Discovery– as it happened

Rolling coverage of the latest economic and financial news
  
  

Representations of virtual currency Bitcoin on US dollar banknotes
Representations of virtual currency Bitcoin on US dollar banknotes Photograph: Dado Ruvić/Reuters

Closing summary

Time to recap.

Bitcoin has fallen to its lowest level in three months, after Elon Musk sparked fears that Tesla could sell its holdings in world’s largest cryptocurrency.

After some wild swings, bitcoin has fallen back below $43,000 this afternoon, its lowest level since February.

It had plunged on Sunday night, after Musk appeared to suggest that Tesla had sold its Bitcoin holdings, or was planning to do so.

The Tesla chief, who last week suspended plans to let people buy electric cars using bitcoin and criticised its environmental impact, caused confusion by replying ‘indeed’, to a tweet last night which read:

“Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”.

Several hours later, with bitcoin having hit three-month lows, Musk clarified (around 12 hours ago) that Tesla hasn’t sold any of its remaining bitcoins which it acquired earlier this year (it did sell some in the first quarter).

This clarification helped bitcoin bounce back in early London trading. But the cryptocurrency has come under pressure again as the day ran on.

It’s currently trading around $42,500, down almost 10% over the last 24 hours...

....which means it has now plunged by around a third from from last month’s peak.

Other cryptocurrencies have also fallen, with ether down 10% over the last 24 hours around at $3,200.

Analysts warned that Musk’s ability to send prices wild was undermining claims that crypto assets were becoming more mainstream.

Several fund managers told the FT they were wary of crypto, given recent high volatility and speculation.

Hugh Shields, financial trader at SpreadEx, explains:

The big story came today in the Cryptocurrency world with Bitcoin and Ethereum both hit on the open after another tweet from Elon Musk.

Simply a one-word tweet “Indeed”, in reaction to a statement indicating the possibility of Tesla selling their Bitcoin holdings in the future, caused two of the biggest cryptocurrencies to fall by such amounts.

In addition to the market’s reaction to Musk’s tweet last week, crypto investors should fear the fragility of such markets when one person’s opinion is so overwhelmingly potent.

Jeffrey Halley of OANDA cautioned that crypto assets were also facing the possibility of tighter regulation, after the hackers who seized control of the Colonial Pipeline were reportedly paid a $5m ransom in bitcoin.

Attacks on critical US infrastructure facilitated by cryptocurrencies will not go unnoticed by the US government and other countries. I would argue that the regulatory threat to cryptocurrencies has increased exponentially, more so even than big-tech regulation.

Bitcoin has been under pressure since the Musk Tweet, but I would argue that the beginning of the end of the wild-West of crypto-mania is now upon us.

Naeem Aslam, analyst at Think Markets, said Bitcoin was already losing steam and could tumble further, with $38,000 a possible target:

“It is true that the current sell-off in Bitcoin price is mainly due to Elon Musk...But the reality is that bitcoin lost its upward momentum a long time ago, and this is because all that positive news about bitcoin failed to push bitcoin prices higher.

In other news...

AT&T, the parent company of CNN, HBO and the Hollywood studio behind the Batman and Harry Potter franchises has struck a deal with Discovery to create a new global media superpower to take on streaming services Netflix and Disney+.

Shares in UK travel and hospitality firms have dropped, on worries that rising cases of the Indian variant of Covid-19 could delay the easing of lockdown rules, or force restrictions to be reimposed.

The government has reported tonight that the number of confirmed UK cases of the Covid variant first detected in India has almost doubled in four days.... as experts warned it could become the dominant type of the virus imminently.

Despite these concerns, airlines have urged the UK government to add more countries to its ‘green list’, saying the current roster of just 12 counties was too limited.

The call came as Ryanair posted a record loss, but also reported a pick-up in bookings in recent weeks.

UK hotels have been warned they could suffer a swathe last minute cancellations, wit data showing that many UK holidaymakers are booking stays at two or more hotels - and planning to cancel all but one.

China’s economic recovery slowed last month, with retail sales and factory output both rising at a lower rate than in March.

The UK government’s bill for tackling Covid-19 has risen by £100bn since the start of the year and now stands at £372bn, according to the independent watchdog that oversees Whitehall spending.

The pandemic has also forced the World Economic Forum to cancel its summer meeting in Singapore, which had been scheduled for August.

And new UK data has shown that the proportion of people working from home more than doubled in 2020 during the Covid-19 pandemic, though it remained a minority of overall workers across the UK, according to an official snapshot.

The Office for National Statistics (ONS) said about a quarter of people (25.9%) had worked at home at some point in the week before they responded to officials conducting its annual population survey. It said that this compared with 12.4% of workers in 2019.

UK home-working survey
UK home-working survey

Goodnight. GW

Updated

Covid expected to cost Britain £372bn, says National Audit Office

The government’s bill for tackling Covid-19 has risen by £100bn since the start of the year and now stands at £372bn, according to the independent watchdog that oversees Whitehall spending.

Figures from the National Audit Office highlighted the financial impact of the lockdown imposed to cope with the winter surge in cases of the pandemic and brought a stark warning from the MP who chairs the Commons committee of public accounts.

Amid reports of widespread fraud and contracts going to Conservative party supporters, Labour’s Meg Hillier said:

“Government expects to spend an eye-watering £372bn in response to the pandemic, and public accountability has never been more important.”

Risk of last-minute cancellation ‘chaos’ as UK holidaymakers hoard bookings

Many UK holidaymakers are booking stays at two or more hotels with a view to cancelling all but one at the 11th hour, prompting fears among accommodation businesses of last-minute cancellation “chaos”.

Avvio, a hotel technology provider, said today its data showed that UK hotel cancellation rates were running at “scarily low” levels as consumers – some of whom would ideally like to travel abroad – hedged their bets and hoarded bookings.

Consumers are benefiting from the fact that many hotels and holiday firms have had to offer fully flexible cancellation to attract bookings for this summer and beyond, meaning they can be cancelled for free with perhaps just 24 hours’ or two to three days’ notice. Many travel experts have been urging people booking trips to opt for cancellable options if at all possible.

Avvio said many holidaymakers who were hoping to get abroad in the next few months were holding on to their UK hotel bookings, with cancellation rates running at about 4%, far below the usual 30% levels.

Michael De Jongh, the firm’s chief commercial officer, warned:

“Many holidaymakers have booked both a foreign holiday and a UK stay, and our data shows they are often holding on to both. If they decide at the last minute to risk a holiday abroad, a late rush of cancellations in the UK would create chaos across the whole industry as hotels scramble to fill their suddenly vacant rooms.

Many of these just won’t be filled, resulting in tens of millions of pounds in lost revenue.”

FTSE close: Hospitality and travel firms fall amid reopening worries

In the City, the FTSE 100 index of blue-chip shares has closed slightly lower – down nearly 11 points at 7033.

Travel and hospitality firms were among the fallers today, amid concerns that the UK’s plans to end the lockdown could be disrupted by the new variant of Covid-19 first detected in India.

Rolls-Royce, which makes and services jet engines, fell 4.3%, while airline IAG lost 3.6%. The hotel and restaurant group Whitbread dropped 3%, and the conference organiser Informa dipped by 2.2%.

The FTSE 250 index of medium-sized firms fell 0.5%, with Restaurant Group (which owns Frankie & Benny’s and Wagamama) down 6.7%, the ticketing site Trainline down 5.4%, and SSP Group (owner of Caffè Ritazza and Upper Crust) losing 4.7%.

Pub chains also weakened, with JD Wetherspoon ending 3.2% lower, while the budget airline easyJet lost 2.8%.

This suggests investors are worried that the full end of lockdown, targeted for mid-June, may be delayed. Boris Johnson asked for caution as restrictions on meeting indoors were relaxed today, while health experts urged people to stick to the old rules instead, due to the increase in B.1.617.2 cases.

Michael Hewson of CMC Markets explains:

With the UK embarking on the next stage of its economic reopening, travel and leisure stocks have had a disappointing day with the likes of EasyJet and IAG slipping back, along with Ryanair shares after the airline posted a record annual loss.

Other areas where we’ve seen declines are in the likes of Hollywood Bowl, Premier Inn owner Whitbread, pub chain JD Wetherspoon and Wagamama’s owner Restaurant Group, as rising cases of the Indian variant, raise concerns that the full relaxation in June might get pushed back.

Our Politics Liveblog has full details of the latest Covid-19 developments in the UK:

Updated

World Economic Forum cancels annual meting in Singapore

The pandemic has forced the World Economic Forum to cancel its annual gathering of world leaders for this year.

WEF had been aiming to hold the Annual Meeting in Singapore this August, having already abandoned plans to meet in person in Davos (its usual location) this January.

It had originally hoped to hold the event in Lausanne this month, before plumping for Singapore once Europe was hit by the second wave of Covid-19.

But now, WEF says the Covid-19 pandemic means it won’t be possible to meet safely this summer.

Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned.

This is despite the excellent support provided by the Government of Singapore.

The Forum added that its next annual meeting will take place “in the first half of 2022”, but the location and date won’t be decided until later this summer.

WEF’s annual meeting usually attracts world leaders, business chiefs, economists, charity heads, campaigners, and journalists from around the world, for several days of meeting, speeches and events.

Last week, Singapore tightened its restrictions, stopping restaurants serving inside and limiting public gatherings to two people. A long-awaited travel bubble with Hong Kong has been delayed.

WEF will be holding various events online, though, in the coming months:

Back in the UK, airlines and travel firms are urging ministers to add more countries to the ‘green list’, which people can visit without needing to quarantine or self-isolate.

Our transport correspondent Gwyn Topham explains:

Airlines and travel firms have urged the government to move quickly to open up travel to more European destinations and the US, as thousands of people flew abroad after Britain’s ban on foreign holidays was lifted on Monday.

British Airways and Heathrow criticised the limited green list of 12 countries where quarantine-free travel is permitted, and called on the government to publish an “expected list” of destinations under consideration for summer travel to allow customers to plan.

The Heathrow chief executive, John Holland-Kaye, said France, Greece and Spain should be included, and that he was “surprised and disappointed” that the Caribbean had not made it to the green list.

“This is now getting urgent … if there is no getaway in July and August, many companies will not make it to next year,” he said.

Travel stocks are continuing to slip today, amid concerns about the latest Covid-19 variant.

Shares in IAG, which owns British Airways, are down 2.8% in late trading today while budget airline easyJet are down 2.3%, after health secretary Matt Hancock warned yesterday that people should avoid taking holidays in ‘amber’ countries, as well as those classed as ‘red’.

Neil Hendron, a partner at law firm Gowling WLG, says the WarnerMedia-Discovery merger highlights the permanent shift in the way people watch TV, after more than a year of lockdowns and restrictions.

2021 has been a very busy year for M&A so far and that trend looks set to continue – across many sectors, and in particular in media and technology.

While today in England we are taking our first tentative steps into socialising indoors again, the pandemic appears to have permanently shifted the way people want to consume content – with the market for streaming services looking set to continue to grow and become increasingly competitive.

How significant corporations in the ‘traditional’ media sector such as AT&T and Discovery develop their approach will inevitably have a big role to play in shaping the sector for years to come.

Updated

The Warnermedia/Discovery merger will create a third ”titan of media”, says Ed Moya, a senior market analyst at OANDA.

And that could mean smaller rivals are crushed, meaning consumers ultimately end up paying more, he warns:

A mega-media deal may have created a giant that could go toe-to-toe with Disney+ and Netflix. AT&T will spin off its media business and merge with Discovery. Shares of both AT&T and Discovery were higher on the $43 billion deal. The new combined media giant will have $20 billion in free cash flow to spend on content, which is $3 billion more than what Netflix committed to spend this year.

Now we have three titans of media, which should mean spending wars for content will likely crush the smaller streaming services. Costs will eventually go up and the consumer might actually miss the days of cable TV and adding a couple premium channels.

Updated

Shares in AT&T and Discovery are both rising on Wall Street, as investors reacts to their plan to create a new streaming giant.

Discovery jumped by 10% at the open, and is currently up over 6%.

AT&T shares are up around 4%, following its decision to spin off WarnerMedia, and retreat from its previous ambitions for a standalone media empire.

The merged company will be 71% owned by AT&T’s shareholders and 29% by Discovery’s.

AT&T is receiving $43bn (a mixture of cash, and a reduction in the telecom’s giant’s debt).

Discovery’s president and chief executive, David Zaslav, will run the new entertainment and media giant (whose name should be announced by next week).

Other details are still being worked through, Reuters points out:

Other details, including the future of WarnerMedia CEO Jason Kilar in the new company and how the combined properties and services will be arrange have yet to be worked out, executives said on a call with reporters after the deal was announced.

‘The opportunities in direct to consumer streaming are rapidly evolving, and to keep pace and maintain a leadership position, several things are required -- global scale, access to capital, a broad array of high quality content and industry best talent,’ AT&T chief executive John Stankey told a news briefing.

More here: AT&T to exit media in $43 bln deal with Discovery

Updated

The WarnerMedia-Discovery merger also highlights the need for large amounts of quality content to compete with Netflix and Disney+, following the move towards streamed TV (which accelerated in the pandemic).

Ben Barringer, equity research analyst at Quilter Cheviot, explains:

AT&T are just a few years late to the party, but it is better too late than never at all. AT&T has finally realised that internet streaming television is a thing, and to be successful you need scale and great content.

To put subscriber numbers into context, HBO Max has 64 million subscribers and Discovery has 15 million. At a combined 79 million total subscribers, the new streaming service has a long way to go to achieve the same scale as Netflix or Disney+, which have 207 million and 104 million subscribers respectively.

But this is not really about fighting it out for subscriber numbers. It is more about the growth of streaming versus traditional television. Netflix won’t be too ruffled by the new competition, they are more focussed on creating great global content, distributed globally and they see YouTube as their main competitive foe in terms of scale.

Updated

AT&T’s decision to spin off WarnerMedia into a merger with Discovery shows that its “lavish acquisition strategy” of building a media empire, alongside its wireless and telecoms networks, has failed.

So explains Kester Mann, the director, consumer and connectivity at CCS Insight:

The deal is a tacit recognition from AT&T that its lavish acquisition strategy to assemble an empire of media holdings has spectacularly failed to achieve its objectives.AT&T is determined to take on giant streaming providers such as Netflix and Disney, but clearly feels it is unable to take this leap alone as the market for consuming content continues to evolve.AT&T has been facing a dilemma familiar to many other large telecom operators: does it sharpen its focus on fixed-line and mobile networks to offer best-in-class connectivity amid questionable long-term return, or place bold risks on fuelling new revenue from adjacent areas such as content? The company’s decision to work with Discovery to better maximise its media assets is a strong clue to where its priorities lie.

The Financial Times agrees:

The transaction represents a humbling retreat for AT&T, which ran up one of corporate America’s biggest debt piles in a gamble to become the world’s biggest vertically integrated content and distribution company.

‘This should put an end to the debate about synergies between content and distribution,’ said Jonathan Chaplin, analyst at New Street Research, who called the deal ‘complete capitulation’.

Updated

WarnerMedia and Discovery to create global streaming giant

US telecoms giant AT&T has agreed to combine its WarnerMedia business with Discovery, creating a new streaming giant to challenge Netflix and Disney.

The deal will create a new content powerhouse, with AT&T spinning off its media assets just three years after its $85bn takeover of Time Warner.

It will combine Warner Bros films studios (creator of the Batman and Harry Potter franchises), the CNN channel, and the HBO network behind TV hits including Game of Thrones, Succession and The Sopranos, with Discovery’s stable of reality-TV shows in genres including nature, cooking and home improvement.

My colleague Mark Sweney explains:

The deal marks the latest round of consolidation in recent years as broadcasting, media and tech companies seek scale to compete globally in the streaming age.

In the past 18 months a swathe of new streaming services have launched, with Disney+ racing to more than 100 million subscribers, Netflix topping 200million and Amazon’s Prime Video estimated to have in excess of 150 million regular users.

The deal between AT&T and Discovery aims to create a new player with the content and scale to compete.

WarnerMedia–owned HBO and its HBO Max streaming service have about 64 million subscribers worldwide. Discovery, which owns networks including Animal Planet and the flagship Discovery Channel, reaches more than 88m US homes and has attracted 15 million subscribers to its Discovery+ streaming service which launched in January.

Updated

Hospitality shares drop amid calls for caution as lockdown eased

Shares in UK hospitality and travel-focused companies have dipped today, as people are urged to be cautious as pandemic restrictions are lifted.

Restaurant Group, which owns Wagamama and Frankie & Benny’s, has fallen by 5% so far today, while food operator SSP Group (who run Upper Crust and Ritazza outlets at airports and railway stations) are down 3.5%. WH Smiths, which runs outlets at travel hubs, are 3.3% lower.

Mitchells & Butler, which operates the All Bar One, Harvester and Toby Carvery chains, are down 2.3%, are are fellow pub chain JD Wetherspoon.

Whitbread, which runs the Beefeater and Brewers Fayre restaurants as well as Premier Inns hotels, has slipped by 1.7%. Holiday Inns owner InterContinental (-1%) is also lower.

Today’s rule changes mean that, in England, groups of six people or two households can meet indoors in homes, pubs, cafes and restaurants for the first time since last autumn. Rules also also being relaxed in Wales and most of Scotland.

But several medical and health experts have advised people to keep meeting outside for the time being, due to the risk posed by the Covid-19 variant first detected in India.

As my colleagues Denis Campbell and Jessica Elgot report.

A former government chief scientific adviser, a leading public health specialist and the union representing Britain’s doctors are urging the public to stick to meeting outdoors to reduce the risk of catching or spreading the variant.

Prof Sir Mark Walport, a former director of the Wellcome Trust and a chief scientific adviser until 2017, called on the public to be cautious. “My personal judgement is that I will do things outside as far as possible,” he said. “My advice is that just because you can do something doesn’t necessarily mean you should.”

The ban on overseas leisure travel is also being lifted, replaced by the new ‘traffic light’ system in which travelers from ‘green’, or lower risk, countries won’t need to quarantine.

Health secretary Matt Hancock warned yesterday that people should still avoid travel to countries on the ‘amber’ list (which include France, Germany, Greece, Italy, the United States, and many other major holiday destinations...)

He told Times Radio:

The red and amber list countries are places that you shouldn’t go to unless you have an absolutely compelling reason,

Jet engine maker, and servicer, Rolls-Royce is the top faller on the FTSE 100, down 3.4%.

Budget airline easyJet has slipped by 1%, even though it’s now flying passengers to ‘green list’ countries like Portugal from today.

Hancock also didn’t rule out imposing local lockdown restrictions in places worst affected by the Indian variant of coronavirus. And overnight, prime minister Boris Johnson said people should take this next step “with a heavy dose of caution”, saying:

I urge everyone to be cautious and take responsibility when enjoying new freedoms today in order to keep the virus at bay.

Russ Mould, investment director at AJ Bell, points out that hospitality companies have been hoping for sales to pick up as indoor dining is allowed:

It’s a big day for many businesses as the UK lifts more Covid-related restrictions. This should have been cause for celebration, but all eyes are on the Indian variant and whether the Government is going to impose new lockdowns, be it localised or national,” says

“Businesses will have to make hay while the sun shines, albeit interspersed by lots of dark clouds.

“Hospitality companies will be hoping that their doors stay open from today and not have a repeat of the stop-start cycle they’ve had to endure over the past year and a bit.

It’s also an important day for the airline sector, he adds:

“Airlines are also at a major turning point today as restrictions ease slightly. They are doing everything they can to cater for demand within the still-tight rules and Ryanair implies that customer appetite for travelling is picking up, judging by its bookings since April.

Mihir Kapadia, CEO of wealth management company Sun Global Investments, predicts that crypto assets will struggle to recover recent losses:

“Crypto markets continue to be source of frustration, as they hit their lowest since February. Elon Musk, who has had one of the biggest influences on the market in recent times, tweeted over the weekend that Tesla could be selling its holdings in Bitcoin.

Despite later clarifying that nothing had been sold, this still sparked a rapid sell-off as investors feared the worst. Prices fell to lows of $42,212.56, and we could expect crypto markets to struggle to reach its previous highs due to the current sentiment being held towards Musk and his drastic market actions as of late.”

Back on bitcoin... the Financial Times flags that bitcoin’s recent volatility has raised new doubts among institutional fund managers over the future of cryptocurrencies as an asset class.

Here’s a flavour:

“Our stance with clients is the 10-foot pole rule: stay away from it,” said Jason Pride, chief investment officer of private wealth at Glenmede. “I don’t think the Fed and other regulators are fans of the current market structure for cryptocurrencies.”

Rob Sharps, president and head of investments at T Rowe Price, told the Financial Times: “Crypto has an impact across capital markets, and we’re capital markets experts. Ultimately, the mandates we manage for clients are not well suited for investing in cryptocurrencies, and we recognise the high level of speculation in this space.”

More here.

The latest bitcoin volatility is unlikely to have assuaged those concerns.

But some other wealth managers have been more receptive - having seen crypto prices surge over the last year. Back in March, Morgan Stanley became the first big U.S. bank to offer its wealth management clients access to bitcoin funds, for example.

China’s economic recovery appears to have cooled last month, with manufacturing production and consumer spending both slowing.

Factory output grew 9.8% in April compared with a year earlier -- slower than the 14.1% surge recorded in March, the National Bureau of Statistics (NBS) reported earlier today.

Retail sales slowed even more sharply: rising 17.7% year-on-year in April, down from the 34.2% rebound in March.

NBS spokesman Fu Linghui told a news briefing that China’s economy had shown steady improvement last month, but new problems are also emerging - including the jump in global commodity prices [both iron ore and copper hit record highs earlier this month].

AFP has more details:

“Production demand continued to grow... and the economy continued to stabilise and resume development,” said NBS spokesman Fu Linghui, though he cautioned that the global epidemic situation remained “complicated, and the recovery of the world economy is very uneven”.

ONS: well-managed UK firms handled homeworking move better

The rise of homeworking during the pandemic was most prevalent among IT and communications workers, among women, professional workers, and those employed in and around London.

That’s according to new data from the Office for National Statistics:

The ONS has also looked at management practices during the pandemic, and found that ‘better managed firms’ handled the shift to homeworking better.

It says:

  • The main determinants of good management in British businesses are firm size, firm age and employee human capital, and have not changed significantly during the coronavirus (COVID-19) pandemic.

  • Good management practices have made it easier for firms to adapt to novel practices like homeworking and online sales during the pandemic.

  • Overall, better-managed firms have retained their labour productivity advantage over comparable peers during 2020.

Ryanair has posted the biggest annual loss in the company’s 35-year history, after Covid travel restrictions and national lockdowns nearly wiped out traffic last year.

The airline swung to an €815m (£701m) loss in the 12 months to 31 March, compared with a €1bn profit a year earlier, after passenger numbers plunged 81% in what it said was its “most challenging” year to date.

But the airline struck a hopeful note, suggesting the vaccine rollout would help the company recover from an unprecedented year of disruption for the aviation industry.

Ryanair said it could break even this year, in the absence of further disruption....and also reported “recent strong increases in weekly bookings since early April”, suggesting the recovery in European air travel has begun.

Here’s the full story:

Although bitcoin has risen back to around $45,000 this morning, it’s still trading around its lowest levels since the end of February – and nearly a third off April’s record high.

Elon Musk tweets send bitcoin to a three-month low
Standfirst ...
LineGrd
25,000
35,000
45,000
55,000
$65,000
Jan
Feb
Mar
Apr
May
Guardian graphic | Source: Refinitiv

Neil Wilson of Markets.com says this latest volatility shows that bitcoin is highly speculative, easy to manipulate ...and a bubble:

Finally, I thought Donald Trump’s ban from Twitter would mean markets would suffer less ‘noise’. I was wrong. First meme stocks came along, now we have Elon Musk moving crypto prices with his missives. The latest in the drama saw Bitcoin jump about $2.5k this morning after Elon Musk denied Tesla had sold its Bitcoin holdings.

A nice pop, but this is small versus the Musk-induced selling that has been taking place lately. In addition to Tesla saying it would stop accepting Bitcoin as payment, Musk indicated in a reply to a tweet that the company was dumping or had already dumped all its Bitcoin. Prices fell sharply over the weekend and at $44k the crypto asset is still down by around a third from the all-time high near $66k set in April.

There is nothing new I can say about Bitcoin – volatile, highly speculative, easy to manipulate; a bubble.

Updated

The possibility of new regulation is also weighing on bitcoin, argues Jeffrey Halley of OANDA.

He writes that the “wild-West of crypto-mania” is coming to an end, following the Colonial Pipeline ransomware attack that triggered fuel shortages and panic buying at some US gas stations.

Last week, Bloomberg reported that the hackers who took control of America’s largest fuel pipeline had been paid a $5m ransom, in bitcoin, to end the cyberattack.

That is going to intensity pressure on to regulate crypto, Halley argues:

Attacks on critical US infrastructure facilitated by cryptocurrencies will not go unnoticed by the US government and other countries. I would argue that the regulatory threat to cryptocurrencies has increased exponentially, more so even than big-tech regulation.

Bitcoin has been under pressure since the Musk Tweet, but I would argue that the beginning of the end of the wild-West of crypto-mania is now upon us.

A report from Blockchain analytics firm Chainalysis earlier this month showed that ransomware “exploded in 2020”, with victims paying over $406m worth of cryptocurrency to attackers, four times as much as in 2019 (when it estimates $93m was handed over).

Back in February, Treasury secretary Janet Yellen expressed concern about bitcoin’s use in illicit finance. The Colonial Pipeline hack has highlighted that bitcoin is an effective tool for cybercriminals, so it may spur policymakers into action.

Technically, Bitcoin is ‘pseudonymous’ rather than anonymous -- every transaction linked to a particular address is stored on the blockchain.

As Bloomberg put it last week:

Cryptocurrencies can be a pretty poor currency for criminals. Bitcoin is built on a digital ledger that publicly records every transaction, with users identified by a string of characters called a “wallet address.” If a law enforcement agency can figure out a wallet’s owner, it essentially has access to that person’s entire transaction history, no subpoena required.

Chris Weston of brokerage Pepperstone reports that some bitcoin traders were forced to liquidate their positions due to this latest volatility triggered by Elon Musk (because they couldn’t meet margin calls on either long, or short, bets).

Weston explains:

Elon Musk, it seems, has been taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins – our weekend trading has kicked up, and we’re looking at some serious liquidations through the exchanges, where the last 24 hours we’ve seen over to $1.5bn liquidated.

Weston has also warned that the momentum in bitcoin is ‘to the downside’, adding (via Reuters):

“Why would I want to buy bitcoin right now - even if I’m bullish - until the liquidation is over and you see some consolidation in price?”

This chart shows how Elon Musk’s clarification this morning sent bitcoin rallying back from three-month lows....

Here’s Reuters take:

Musk has boosted crypto markets with his enthusiasm for the asset class, but has lately roiled trade by appearing to cool on bitcoin in favour of its one-time parody, dogecoin.

The gyrations are beginning to spook even steeled traders.

Bitcoin fell more than 9% on Monday to as low as $42,185, its lowest since February 8, but rallied more than 5% to around $44,220.

Introduction: Bitcoin whipsaws on Musk tweets

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Bitcoin is on a wild ride today as Tesla CEO Elon Musk sparked alarm that the electric vehicle maker could sell its holdings -- before clarifying that it has not sold any bitcoin.

The drama began last night on Twitter (of course), when an account called @CryptoWhale tweeted:

“Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

Musk (who last week suspended plans to let Tesla customers pay in bitcoin) replied:

“Indeed...”

Bitcoin had already weakened last week, following Musk’s criticism of its high energy use and environmental impact.

And Musk’s one-word response last night sent bitcoin tumbling to its lowest level since February, as fear swept the crypto world that Tesla could have already sold its holding (even though Musk said last week that Tesla will not be selling any bitcoin).

It slumped as low as $42,212.56, Coindesk data shows -- and further from the record highs over $64,000 seen in April.

But...Musk has now returned to Twitter, and declared that:

To clarify speculation, Tesla has not sold any Bitcoin.

This sent bitcoin bouncing back to around $44,500 in volatile trading -- still down around 10%, and the weakest since the end of February.

Musk’s ability, and willingness, to shift cryptocurrency prices with a single tweet could well deter other companies from following Tesla’s lead and putting bitcoin on their balance sheet.

Kyle Rodda of IG explains that the episode is slowing bitcoin’s move towards the mainstream:

In an exchange on a Twitter thread, the mercurial Mr. Musk implied that Tesla, having backflipped on its decision to accept Bitcoin as a form of payment, may “indeed” offload its Treasury holdings of the asset.

The speculation has seemingly led traders to try and front run Tesla’s potential move, as the thrust behind mainstreaming Bitcoin slows down a little more.

Naeem Aslam, analyst at Think Markets, says ‘Elon’ was the dominant word in the crypto market over the weekend. But, he adds that bitcoin was already shifting downwards - and could have further to fall.....

It is important to keep in mind that it is true that the current sell-off in Bitcoin price is mainly due to Elon Musk. But the reality is that Bitcoin lost its upward momentum a long time ago, and this is because all that positive news about Bitcoin failed to push Bitcoin prices higher.

It was clear that Bitcoin prices went too far, and a correction was due. This correction is taking place now, and it is likely that we may see the Bitcoin price decline further. The near-term support for Bitcoin is near the 38K price level.

Also coming up today

European stock markets have opened a little higher, as concerns over the Indian variant of Covid-19 rise in the UK and coronavirus restrictions are eased further in England, Wales and most of Scotland.

A survey of factories in the New York area, and a new healthcheck on US builders, will show how America’s economy is faring this month.

In the UK, the ONS are publishing a new report into ‘Management Practices, Homeworking and Productivity’ during the pandemic.

A major deal is brewing in the media space, with US telecoms giant AT&T reportedly closing in on an agreement to combing its WarnerMedia unit - which includes CNN and HBO - with rival Discovery.

The agenda

  • 9.30am BST: UK Office for National Statistics report into homeworking in the pandemic
  • 1.30pm BST: New York Empire State Manufacturing Index for May
  • 3pm BST: NAHB index of the US housing market for May

Updated

 

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