Elon Musk in Crypto Radio Silence As Bitcoin Swoons; Housing Market Red Hot
CryptoCorner
So far, the roiling Bitcoin market has been blissfully free of Elon Musk's tweets.
In the past, his comments have sent the crypto's value higher or kicked it down the stairs. Musk, who shrewdly turns the media to his advantage and appears to delight in goosing the joke crypto Dogecoin, may have been chastened by Tesla's balance sheet.
It's unclear exactly what Tesla paid for Bitcoin when it invested $1.5 billion in the crypto last February, but it's almost certainly higher than the current price. On Tuesday, Bitcoin fell below $30,000 for the first time since late January, and this may have created a paper loss for Tesla despite Wednesday's rebound.
The truth likely will be told in the electric carmaker's next quarterly report.
When Bitcoin's price was high, several analysts calculated Tesla had made more on its investment in crypto than it did selling cars. That made Musk look smart and gutsy. It didn't make him more modest.
But the current market downdraft may tarnish Musk's reputation for prescience. Musk hasn't said he's bailing and that appears to be the right move for major Bitcoin investors.
"Inflows for Bitcoin have skewed to spot accumulation as opposed to speculation, as investors match their expectations towards a longer-term horizon, signaling less propensity to sell," Lennard Neo, head of research at Stack Funds in Singapore, said in a research report.
About $2.3 billion in options expire Friday and that could stoke the market's volatility.
"We believe most expectations have been priced into the markets, and we should expect a relatively quiet session going into the next couple of days," Neo said. "We believe Bitcoin is very close to the bottom, at least in this current wave."
Alexandra Clark, a trader at London-based GlobalBlock, said China's decision to ban Bitcoin mining operations underscores the cryptocurrency's success and is likely to strengthen the market in the long run.
"China is inherently opposed to free technology and thus by banning Chinese mining operations there is a sense that cryptocurrency is working and is a real threat to China's political and economic system," she told Newsweek. "Of course, you technically cannot 'ban' Bitcoin, so ultimately China is excluding its users from the network."
Clark said putting China's Bitcoin miners out of business won't result in long-term harm to the network.
"The negative impact is difficult to fully assess at this time, but, in theory, a declining hash rate makes it easier for bad actors to source the necessary hashing power to attack," she said.
But the system has a built-in market response mechanism that gives it great flexibility.
"However, the Bitcoin network's hash rate is designed in such a way that it adjusts the computational difficulty of the mining process," Clark said. "So, if the hash rate falls, so too does the difficulty—thereby incentivizing new miners. Based on this, aside from possible short-term price fluctuations, I am confident that the market will remain largely unaffected."
"Hash rate" is a measure of how many calculations per second are performed to maintain Bitcoin's worldwide network.
Clark said BIT Mining, a Chinese Bitcoin mining firm, has sent 320 mining machines to Kazakhstan with another 2,600 to follow.
"Many are looking to Texas as the new mining hub following comments from Governor Greg Abbott," Clark said, "but ultimately miners will settle in regions with the cheapest energy prices."
Earlier this month, Abbott tweeted, "Blockchain is a booming industry that Texas needs to be involved in. I just signed a law for Texas to create a master plan for expanding the blockchain industry in Texas."
In May, the governor tweeted, "Texas is becoming a mecca for Bitcoin miners."
Musk pummeled Bitcoin's price when he said Tesla would no longer accept it as payment, and expressed concern about fossil fuels used to generate power used in mining operations.
In mid-day trading Wednesday, Bitcoin changed hands at $33,688.18, up 4.60% in the last 24 hours and up 15.87% for the year. The 24-hour range is $31,741.68 to $34,818.60. The all-time high is $64,829.14. The current market cap is $632.84 billion, CoinDesk reported.
MarketPulse
A tight supply of existing houses, low mortgage rates and strong demand sent prices 24.4% higher in May, the National Association of Realtors reported.
The year-over-year increase was the biggest since 1999 when the trade group started compiling data.
The median price of an existing house rose to $350,300, a new high.
Prices have posted year-over-year gains since March 2012.
However, rising prices slowed the pace of sales.
"Home sales fell moderately in May and are now approaching pre-pandemic activity," Lawrence Yun, chief economist for the Washington-based NAR, said in a report. "Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market."
Existing-house sales declined 0.9% in May from April, the fourth consecutive month sales fell, NAR reported. Sales in the Northeast declined 1.4%, dipped 0.4% in the South and dropped 4.1% in the West, NAR said.
But sales of existing houses in the Midwest rose 1.6% in May, the only region to experience an increase.
Slightly more than 50% of existing-house buyers who financed the deal put at least 20% down, NAR said.
Rising prices and limited ability to make a hefty down payment forced some first-time buyers out of the market. This appears to be reflected in the declining number of mortgage applications.
The Mortgage Bankers Association said applications dropped 17% from a year ago for the week ended June 11.
"The market's outlook, however, is encouraging," Yun said. "Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes."
In many regions, existing houses sell quickly and the seller receives multiple offers above the asking price.
New construction may ease some of the pressure, but the rising cost of materials and limited land is constraining housing starts in some markets.
Permits for new privately owned houses declined 3% in May from April, but were 34.9% above May 2020 when the economy shut down during the COVID-19 pandemic, the U.S. Commerce Department reported.
Housing completions declined 4.1% in May from April but 16.1% above May 2020.
New York-based Blackstone Group agreed to buy Home Partners of America for $6 billion, suggesting Wall Street believes the housing market will remain strong.
Home Partners buys houses, leases them and offers tenants, including those priced out of the current market, the opportunity to buy in the future.
"The fundamental premise of the (Home Partners of America) platform is to provide residents with the opportunity to live in their chosen home with the option to purchase it," Jacob Werner, senior managing director of Blackstone Real Estate, said in a news release. "We intend to build on that goal and expand access to homes across the U.S."
As the housing market struggled to recover from the recession caused by the collapse of the subprime mortgage market, Home Partners in 2012 started its lease-to-own program in 22 markets and expanded to 40 markets by 2017.
Blackstone snapped up many houses during the subprime mortgage crisis when lenders sold foreclosed homes at discount prices.
The company eventually acquired about 80,000 single-family houses and rented them through Invitation Homes. Blackstone left the market in 2019, but re-entered with the acquisition of Home Partners.
In a related issue, economists at the Federal Reserve banks of Atlanta, Boston and Philadelphia found that minority homeowners, especially blacks, were more likely to miss mortgage payments during the COVID-19 pandemic and less likely to refinance to take advantage of low interest rates.
"Persistent differences in the ability to catch up on missed payments could worsen the already large disparity in home ownership rates across racial and ethnic groups," the report said.
