Musk complimented Bitcoin, stating that it is ready for broader adoption. He said that he is “late to the party,” suggesting that he is now an enthusiast in the dominant cryptocurrency.
So why did Bitcoin react with a drop?
On Sunday night, January 31, Elon Musk, the CEO of Tesla and SpaceX, appeared on the popular app Clubhouse to discuss various topics. During the conversation, Musk was asked about his thoughts on Bitcoin. He said:
“I do at this point think Bitcoin is a good thing. I am a supporter of Bitcoin. I am late to the party but a supporter. Bitcoin is on a verge of getting broad acceptance by traditional finance people.”
Yet, despite the positivity around BTC, the price of BTC saw a sharp drop from $34,400 to below $33,800 within minutes.
According to analysts at IntoTheBlock, BTC saw the largest deposit to centralized exchanges in over four months last Friday. This trend coincides with the short-term recovery of BTC from $32,200 to around $33,800.
Bitcoin price movement
Prior to the conversation, traders and analysts expected the price of BTC to move up in anticipation of it.
A pseudonymous cryptocurrency trader known as “Loma” said that Bitcoin was rising in anticipation of the Musk Ask Me Anything (AMA). He added
“I’m not saying, you should go and long it or something. Just that if you’re bearish, you might have a better entry in a few hours. $BTC (and consequently the rest of the market) moving up right now in anticipation imo.”
Bitcoin enthusiasts were expecting Musk to mention BTC, after his Twitter bio change and his like on a DeFi-related Twitter post.
If Musk talks about Bitcoin on Clubhouse, analysts said that Bitcoin could see a Friday-esqe rally, when it surged 14% in two days.
But, there were several concerning on-chain indicators that signaled a weakening trend.
Neko, a semi-pseudonymous cryptocurrency trader, said that the premium on Coinbase was on the decline. This typically signals a drop in buyer demand from the U.S.
“BTC Coinbase Premium Index *The gap between Coinbase Pro price(USD pair) and Binance price(USDT pair) which indicates a strong spot buying pressure from Coinbase when the premium is high.* Current price exceeds the premium, which is a bit concerning vs last week.”
Due to the lackluster on-chain fundamentals, Bitcoin likely pulled back as soon as the highly anticipated event occurred, which included Musk talking about Bitcoin.