Bitcoin Rises on Elon Musk's Tweets; Housing's Rural Surge Pre-Dates COVID-19


Bitcoin's rally got a boost Monday when Elon Musk said Tesla would again accept the crypto as payment for its electric cars if clean energy usage reaches about 50% in the cryptocurrency's mining operations.

However, Musk didn't say how the energy usage of Bitcoin miners would be monitored.

Bitcoin miners solve complex hexadecimal puzzles to earn new Bitcoin. The process is needed to refresh the blockchain, the unbreakable record of the crypto's transactions.

The rally had been building prior to Musk's latest tweet.

Michael Saylor, MicroStrategy's CEO and a strong proponent of Bitcoin, took on $500 million in debt and bought the dip as many retail investors sold into the downdraft.

Jason Deane, analyst at Quantum Economics, in London, said Bitcoin's rally is supported by the convergence of four key factors.

"First, we have been through an essential consolidation period and shaken out over-leveraged positions, building a solid foundation for the next breakout," he told Newsweek. "Second, El Salvador's official adoption of Bitcoin as a national currency has likely accelerated the flagship cryptocurrency's adoption elsewhere in the world.

"Third, large-scale holders are making strong, positive moves, such as Saylor's latest debt-funded buying round and Musk's effective 'compromise' on Bitcoin mining," Deane said. "Fourth, Taproot's easy and early acceptance by miners will allow quick deployment of a major upgrade that will enable significantly enhanced functionality."

Taproot, scheduled to take effect in November, will increase Bitcoin's transaction privacy and efficiency. It's also expected to boost the use of smart contracts, an important element of blockchain technology designed to eliminate the need for middlemen and cut costs.

Musk's tweets have boosted and pummeled Bitcoin's price, underscoring the asset's newness and volatility.

In February, Bitcoin's price soared after Tesla announced a $1.5 billion investment in the crypto and said it would accept it as payment for electric vehicles. But in May, Tesla said it would no longer accept Bitcoin due to the extensive use of fossil fuels in Bitcoin mining.

In the most recent downturn, Bitcoin plunged as much as 50% from its record high.

Cambridge University estimates that 39% of energy used by crypto miners is powered by renewable resources, primarily hydroelectric.

While Bitcoin's mining energy usage is intense, it's a small percentage of the world's total demand. Cambridge University estimates that Bitcoin miners use about 130 terawatt hours of electricity a day, or about 0.6% of the world's consumption. A terawatt is equal to 1 trillion watts.

The electricity wasted by plugged in but inactive home appliances such as stereos, TVs, computers, microwaves and washing machines could power Bitcoin mining for 1.8 years, the British researchers said.

Market sentiment, especially among retail investors, is a key factor in the Bitcoin market.

A survey conducted by Voyager Digital, a Jersey City, New Jersey-based provider of crypto brokerage services, found that 81% were more confident of the future of cryptocurrencies and 87% planned to increase their holdings.

The survey was based on 3,671 respondents who completed 50 to 100 trades in a 30-day period on the Voyager platform. The survey was taken at the end of May when the market took a hit.

Thirty-nine percent of respondents expected Bitcoin's price to rise to a range between $56,000 and $70,000, and 28% looked for a price between $41,000 and $55,000 by September 30, the end of the third quarter.

Bitcoin logo
In a survey conducted by Voyager Digital, a Jersey City, New Jersey-based provider of crypto brokerage services, 39% of respondents expected Bitcoin's price to rise to a range between $56,000 and $70,000, and 28% looked for a price between $41,000 and $55,000 by September 30. The photo illustration shows a price graph along with a symbol representing Bitcoin. SlavkoSereda/Getty

Eighteen percent believed the price will soar above $71,000, surpassing Bitcoin's previous high.

"The fact that the vast majority of our large sample size of investors are more confident in the future of cryptocurrency, shows how people see May's volatility in many crypto-assets as a buying opportunity," Steve Ehrlich, CEO of Voyager Digital, said in a note to Newsweek.

The Bitcoin Fear & Greed Index registered 23 Monday on a 100-point scale where 0 means "extreme fear" and 100 means "extreme greed."

"Extreme fear" suggests investors are worried and may indicate a buying opportunity for gutsy investors. "Extreme greed" may indicate the market has become overpriced and is due for a correction.

The readings aren't based on an algorithm, and reflect market sentiment based on a range of factors, including social media, volatility, trading volume and Google searchers. However, the index foreshadowed the recent market swoon.

During the downturn, many retail investors sold while larger investors held, and in some cases, expanded their holdings.

This is likely to mean the Bitcoin market will become more concentrated.

"Bitcoin is still a very young asset in global terms, so these cycles of retail over-exuberance and correction against a backdrop of institutional accumulation will probably continue for some time," Deane said. "In the long term however, as Bitcoin's 'second stage' adoption as a currency continues to grow, it's quite possible that volatility will decline and speculative pressures will become less relevant."

That may change how the Bitcoin market functions, but it won't alter the crypto's purpose.

"Bitcoin is the ultimate free market for any individual, organization or nation on the planet so it is inevitable that the overall distribution will be uneven," Deane said. "It's also important to note that it doesn't prevent Bitcoin's primary objective from being carried out: Whatever amount of Bitcoin is available or whatever the relative price in local fiat terms, you will still be able to use it as a store of value or medium of exchange regardless of how much is held by large players."

Deane said many variables affect Bitcoin's price and it is therefore impossible to accurately project future highs.

"Bitcoin's relative fiat price is likely to appreciate in the future, with no theoretical upward limit," he said. "However, the emphasis here is theoretical—this is something the human race has simply never had before and we're effectively writing the rules as we go."

Those responding to Voyager Digital's survey are also bullish on Cardono, Chainlink, Polkadot and Dogecoin, the joke crypto created in 2013 as a parody of Bitcoin and ballyhooed in tweets by Musk, who also founded SpaceX.

Critics say Dogecoin often receives more attention than it merits. The crypto recently fetched $0.33. The coin peaked earlier this year at $0.74 and has never topped $1.

The number of Bitcoins is capped at 21 million. There are 129.88 billion Dogecoins in circulation and by some calculations 15 million new coins are added each day.

That means Bitcoin's price is likely to increase as long as demand remains strong while it's hard to imagine demand for Dogecoin will ever outstrip supply.

In mid-day trading Monday, Bitcoin changed hands at $40,488.97, up 12.47% in the last 24 hours and up 39.00% for the year. The 24-hour range is $36,036.90 to $41,046.77. The all-time high is $64,829.14. The current market cap is $758.52 billion, CoinDesk reported.


It's no shock that many homebuyers fleeing major cities seek large houses in the suburbs and rural areas. But the COVID-19 pandemic didn't launch the exodus from the cities.

"The movement away from urban areas began well before any of us heard of the phrase 'COVID-19,'" Freddie Mac, a stockholder-owned enterprise created by the federal government in 1970 and intended to keep mortgage money flowing to middle-income people, said in a research report. "Moreover, that movement is to rural areas within metro areas, suggesting that while people may be leaving cities, they are not necessarily moving far from the advantages that cities offer."

However, it appears COVID-19 has sped up the trend and sparked bidding wars in some markets, driving prices higher. Those who can work from home appear to be leading the latest wave of those leaving big cities.

Freddie Mac based its findings on a survey of mortgage data and census tracts. The researchers defined 52% of the nation's census tracts as suburban, 27% as urban and 21% as rural.

"Even prior to the pandemic, rural home purchases outpaced urban purchases over the 2010s decade, and were higher than suburban home purchases over the last few years of the decade," Freddie Mac researchers found. "In fact, between 2010 and 2019, rural purchases were up 3%, suburban area home purchases were up 2%, while home purchases in urban areas were down 5%."

Suburban areas still have the largest volume of purchases, but the rate of increase is lower than rural areas. In 2010, 17% of all mortgages were for houses in rural areas. The number increased to 20.5 by 2019.

Age is often the key factor in determining where people choose to live. Most homebuyers under the age of 45 prefer to live in urban and suburban areas while most aged 55 and above chose rural areas.

"In 2019, the share of home purchases by Non-Hispanic Whites was highest in rural areas at 75%, followed by 59% in suburban areas and 51% in urban areas," the researchers said. "The share of Hispanic homebuyers has increased in all three areas between 2010 and 2019."

Median income of house-hunters increased in urban, suburban and rural areas, but applicants in the suburbs had the highest median income. However, income grew faster in cities and rural areas than in the suburbs.

Understanding who is buying and where they chose to live helps Freddie Mac better achieve its goal of making home ownership possible, the researchers said. The Federal Reserve, the nation's central bank, slashed interest rates to support the economy during the 2020 economic shutdown intended to curb spread of COVID-19.

It has kept interest rates low to boost the recovery, but some fear the policy will spark inflation. The Fed believes the recent spike in higher prices is "transitory" and while it may persist into next year, inflation will subside to its 2% target.

Consumer prices rose 5% in May from a year earlier, the largest increase since August 2008, the U.S. Labor Department said.

In April, the most recent month with complete data, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development said 863,000 new houses were sold. The median price was $372,400, up 20% from the same period a year ago. The average price was $435,400.

Many first-time buyers concentrate their search on new houses because demand is strong for existing homes in established neighborhoods. In many cases, sellers receive multiple offers above the asking price, forcing many first-time buyers to look elsewhere.