How does Elon Musk Affect Crypto Space?
Not so long ago, the cryptocurrency world realized that Elon Musk’s tweets could have a huge impact on cryptocurrency, in particular Bitcoin. One of his words can bring down the cryptocurrency rate or, on the contrary, increase the value of digital money several tens of times. How long will such an impact last? Can cryptocurrency investors influence Musk’s behaviour and make claims against him?
Tesla Manipulates the Cryptocurrency Market
On July 21, at The B Word conference dedicated to bitcoin, Elon Musk said that he not only owned the half of world’s cryptocurrency, Bitcoin and Dogecoin, but also had savings in Ethereum. Such a loud statement of the head of Tesla led to a jump in the cost of Ether by 12% and amounted to more than $2000. This is not the first time Musk’s statements have led to a change in the rate of cryptocurrencies. Why is the billionaire manipulating the $1.3 trillion cryptocurrency market?
The Collapse and Rise in the Crypto Value
On January 29, 2021, the following phrase appeared on Twitter “In retrospect, it was inevitable” with the hashtag #bitcoin in the profile description. Such a hint turned green for investors. The cost of bitcoin instantly rose by 20% to $37,700.
After that, there was a new loud statement from the head of Tesla. Elon Musk stated that he invested $1.5 billion in bitcoin and is starting to accept bitcoins as payment for his products. It took a little more than a week for Bitcoin to grow and jump over the record $50,000 mark. The growth of the cryptocurrency since the beginning of the year was 72% and continued to grow.
However, in May 2021, Musk announced that his car company Tesla would no longer accept Bitcoin as means of payment for electric vehicles since it takes a lot of electricity to produce cryptocurrency, and this is harmful to the environment.
He tweeted:
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coil, which has the worst emissions of any fuel.
Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.
Tesla will not be selling any Bitcoin, and we intend to use it for transactions as soon as we mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin`s energy/transaction. “
Such a statement on Twitter led to a drop in Bitcoin by 15% to $46,000. And a few days later, the value of the cryptocurrency fell below $45,000. The subsequent drop in the cryptocurrency rate occurred after correspondence with one user of social networks. He wrote that if users find out that Tesla has gotten rid of its remaining cryptocurrency assets, they will upset the cryptocurrency community. Musk agreed to this statement, which confirmed the likelihood of selling cryptocurrency assets.
Many climate supporters are in solidarity with Musk and have become opponents of cryptocurrency advocates. Climate researchers have long talked about increasing the usable energy needed to mine Bitcoin. CBECI (Cambridge Bitcoin Electricity Consumption Index) estimates that Bitcoin uses about 149 terawatt-hours (TWh) of electricity per year. Chinese researchers have calculated that by 2024 bitcoin miners in China could produce 130 million tons of carbon per year. We can compare this to emissions from small countries, which will have a detrimental effect on the Earth’s climate.
But even after such statements, at The B Word conference, Musk said that he would continue to keep bitcoins in his portfolio. He stated that he would not sell cryptocurrency and lose his money. He also clarified that he can rock the cryptocurrency. Furthermore, he also revealed that Tesla will accept Bitcoin in the future as mining becomes more sustainable.
Not accepting bitcoins is Musk’s clever marketing ploy. It is unlikely that crypto holders would appear willing to sacrifice their digital currency to buy Tesla. Musk manipulates the price, provoking “pumps” and “dumps” so that Tesla can maximize the profit from operations with Bitcoin.
Musk’s Influence on Dogecoin
Another cryptocurrency that Musk also has an incredible impact on is Dogecoin. In early February, Musk posted a photo of a flying Falcon 9 rocket and wrote “Doge”. Less than an hour later, the value of Dogecoin increased by 47% and amounted to $0.059 per token.
Just two days later, on his Twitter channel, Musk called Dogecoin “the people’s cryptocurrency”, and a little later commented that he bought this cryptocurrency for his son.
On May 8, Dogecoin was up 30% in value. And after Musk’s speech on Saturday Night Live, in which he called Dogecoin “hype”, cryptocurrency shares plummeted by 28%. At the beginning of the show, the price of Dogecoin was $0.65, and a few hours later, the price was no longer so attractive and was only $0.47.
End of the Mask’s Influence
In an interview with CNN in May 2021, the creator of the Ethereum cryptocurrency Vitalik Buterin said that the influence of the billionaire and the head of Tesla will not last forever. He noted that markets will learn to cope with its impact in the future. We are already finding confirmation of this.
SpaceX and CEO Tesla Elon Musk recently announced that SpaceX had invested in bitcoin and confirmed plans to bring back the first cryptocurrency as a mean of payment for Tesla. He spoke about how bitcoin mining has become more environmentally friendly and now his company is resuming payments with bitcoins.
Unlike his statement in January and May this year, this news had little or no effect on the price of the main cryptocurrency. Bitcoin climbed to $32.8K and then dropped back to $32K.
When Tesla announced the purchase of bitcoin for $1.5 billion, bitcoin rose in price by $8 thousand per day.
According to the leading strategist of Exante, Janis Kivkulis, Musk is interested in the process of influencing the cryptocurrency market and how cryptocurrency quotes are changing. On August 10, Bitcoin was up again and is trading at $45,030.60.
But the leading analyst at 8848 Invest, Viktor Pershikov, believes that the role of Elon Musk and his influence in the crypto industry is decreasing with each of his statements. He believes that they disappointed market participants with Musk’s comments. Assets do not grow in value, so they gradually stop paying attention to the statements of the head of Tesla.
Tesla’s financial policy looks like a betrayal of investors’ expectations. Musk’s statements guide many investors, and 59.4 million Twitter subscribers read to him and draw further conclusions. Most users have stopped perceiving Musk’s tweets as a trigger for momentum.
Elon Musk is aware of the power of his publications and the subsequent impact on the cryptocurrency market. He understands that Tesla’s profit directly depends on this, and his statements are devastating for small retail investors and bring cryptopanic to this market.
After Musk has demonstrated his ambivalence towards cryptocurrencies, investors are less violent in his comments. It is difficult to give guarantees that the billionaire will not announce the closure of all investment portfolios tomorrow.
The head of the data analysis department CEX.IO Yuri Mazur said, “Market participants have, in a sense, been vaccinated against Musk’s verbal interventions. However, this news is very positive and in the long term creates a solid foundation for Bitcoin’s growth and investing in crypto. “
Financial analyst of the Currency.com crypto exchange Mikhail Karkhalev said that the crypto market lacked something more emotional and explosive. According to the analyst, the cryptocurrency market for further growth does not have enough trading volumes and demand for bitcoin, but not Musk’s sonorous statements.
We can endlessly understand Musk’s manipulations, but it is clear that due to the activity of a business owner, cryptocurrencies have become his hostages and now directly depend on his mood.
