Apollo’s Moonshots: Bitcoin a buy despite Musk dump
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Matthew Harcourt, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares his weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.
Elon Musk crashed the price of Bitcoin last week by announcing that Tesla Motors would stop accepting cryptocurrency for the purchase of electric cars, just two months after Tesla started accepting it.
BTC was trading just below US$50,000 when Stockhead talked to Apollo Capital’s Matthew Harcourt on Friday. The analyst called Bitcoin his coin for the week.
“It’s looking relatively weak, but we think it’s in the buy category.
“The fundamentals of Bitcoin really haven’t changed. It’s going to remain a big, big portion of our portfolio,” Harcourt said. (The value of Apollo’s BTC holdings have declined relative to the rest of its portfolio given the altcoin bull run this year, but it still stands at about the 20 per cent mark.)
“And we think Elon’s tweet and Tesla’s decision was either misinformed or completely planned, and there’s more behind the surface.”
Musk might be trying to burnish Tesla’s green credentials as it tries to enter the billion-dollar US renewable credit market, Harcourt said.
Reuters reported on Thursday that Tesla has a pending application before the US Environmental Protection Agency, but allowing an electric carmaker into a program set up to boost biofuel producers would be controversial with rural farmers.
“So what I think is happening is, this is a PR stunt, where Tesla is trying to say, ‘look at us, we’re so good because we’re not taking Bitcoin anymore because it uses too much energy, because it is powered by coal and things that aren’t renewable energy — which isn’t explicitly true.”
“The PR definitely outweighs the facts of Bitcoin mining.”
It’s true that Bitcoin mining uses an enormous amount of energy, but 50 to 70 per cent of that is from renewable energy, Hartcourt said.
“Miners are agile, they congregate around the cheapest energy sources in the world, and the main one is hydroelectricity,” Harcourt said.
“There’s a lot of excess electricity that is produced from them because they’re tucked away in the amounts, and it’s hard to store and transport energy, so a lot of that excess energy from those hydro plants goes to waste.
“And so you get miners flocking to those areas and eating up all that excess energy for really, really cheap.”
As much as half the world’s Bitcoin mining is performed in just one province in China, Sichuan.
“They have all these hydroelectric plans, that would have gone out of business if it weren’t for these Bitcoin miners,” Harcourt said.
“A lot of Bitcoin mining is renewable.”
BTC also compares well to the energy consumed by gold mining and the legacy banking system, Harcourt said.
Musk’s tweet also inaccurately suggested that the number of Bitcoin transactions is linked to the network’s energy consumption.
“Not sure if he actually thinks that, because he’s a smart man, but that’s wrong,” Harcourt said. “Bitcoin could have zero transactions tomorrow, but the same energy usage.”
With this much uncertainty in the crypto market, Harcourt said traders really want to follow the two biggest cryptocurrencies, Bitcoin and Ethereum, very closely.
“It will be interesting to see what happens with Ethereum here. If you look on a chart, it looks quite overextended. It will be interesting to see if that comes down, or if find a floor above that US$3,500 level.
“That’s the key thing to watch this week. If Ethereum breaks down, you’re going to see a lot of volatility in Eth DeFi as well.”
It’s also important for Bitcoin to get above US$50,000 and over its 100-day moving average, Harcourt said.
“And then you want to see Ethereum stay as high as it can really, go sideways. Or it’ll be interesting to see if it goes back down.”