Responding to the company’s CEO and the richest man in the world, Elon Musk, Tim Draper, the billionaire Bitcoin (BTC) who also invested in Tesla early on, added #Bitcoin to his Twitter bio to highlight the Twitter CEOs Jack Dorsey and Reddit join founder Alexis Ohanian.
Draper, who reportedly holds around 30,000 BTC, told Musk that he plans to pay for the Tesla cybertruck with BTC while promoting his bitcoin payment processor portfolio company OpenNode. He said:
“Hello Elon Musk, I would like to buy a Tesla Cybertruck. Although personally I prefer to keep my own #bitcoin, you can accept #bitcoin through our Draper VC company OpenNode. “
On January 29, Bitcoin rose 14% in just 30 minutes, shortly after Elon Musk’s Bitcoin support was spread on social media.
Many speculated that Musk may have been the high net worth investor behind the massive Bitcoin accumulation on Coinbase over the past week.
In the past few days, the premium for Coinbase has increased to around $ 200 compared to Binance. This usually indicates significant buying activity from US investors.
However, Musk did not pursue the organic transition and overnight the rally was reversed. Bitcoin rose from $ 33,000 to over $ 38,000 and fell back to $ 33,000.
Draper probably tweeted about Musk because of Musk’s interest in Bitcoin and the positive market sentiment surrounding BTC.
In a recent interview with CNBC, Draper said that he is actually buying more bitcoin. Draper also said that he has no plans to sell BTC in the future and expressed his strong belief in Bitcoin as the “currency of the future.” He said:
“I actually just buy more [Bitcoin]… I have no interest in ever selling my #Bitcoin for dollars. Why should I take the currency of the future and sell it for the currency of the past? “
On-chain data shows that Draper isn’t the only one focused on long-term profits. In fact, “HODLing” activity, which indicates Bitcoin investors’ intent to hold BTC for a long time, is at record highs.
Bitcoin 1 year HODL wave. Source: Lookintobitcoin
Will bitcoin ever be used as currency?
Bitcoin is increasingly viewed as a store of value and an alternative to gold as a safe haven. In recent months, however, the correlation and inverse correlation between Bitcoin, Gold, and stocks has decreased.
Bitcoin correlation against S & P500, VIX, DXY, gold. Source: Digital Assets Data
In addition to the massive price gains, the fear of inflation and the strong inflow of liquidity from the central banks have sparked massive interest among institutional and wealthy investors.
As the adoption of BTC continues to grow, the question remains whether Bitcoin would ever be used as a currency and medium of exchange like today’s dollar.
Ironically, investors are less likely to sell or spend their BTC when the price of Bitcoin is in a significant upward trend. Draper himself suggests that he will probably pay the $ 40,000 for the cybertruck in dollars rather than the “currency of the future”.
However, if the Bitcoin price stabilizes at a sufficiently high price level in the future and has lower volatility, BTC could become more convincing for everyday payments.
Ultimately, as the network gains more users and needs to scale, using the Bitcoin blockchain network for day-to-day payments on the first tier can become inefficient.
At this point, second-tier scaling solutions like Lightning Network and sidechains like Liquid can become blockchain apps for instant processing of small payments. Such interoperable platforms are likely to have their own tradeoffs with varying degrees of trustworthiness, privacy, and decentralization.