Bitcoin price soared to US$40,000, thanks to Elon Musk’s tweet that shook the crypto market.
If 280 characters (or less) can stir up the crypto market, shouldn’t we rethink cryptocurrency being a viable investment? The billionaire and Tesla CEO have made several tweets about cryptocurrency for a year and all of those tweets made headlines for causing fluctuations in cryptocurrency prices. Most of his tweets were particularly affecting Bitcoin and Dogecoin, of course.
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, 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 a great cost to the environment. Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
This tweet shook the Bitcoin price chart in May 2021. This tweet alone was responsible for Bitcoin’s price drop of around 15%. Two months prior to May, Elon Musk announced his support for Bitcoin stating that Tesla would accept payments in Bitcoins. Hence, investors were boggled with confusion when the prices dipped drastically and decided to sell in haste.
Over the months, it has become clear that Elon Musk is the puppeteer and cryptocurrencies are his puppets. While it might not be intentional, investors have to agree that the future of their cryptocurrency investment is partly controlled by one man.
After going back and forth with his statement of Tesla not selling its share of Bitcoins, while there were hints that the company did in fact sell its holdings, on May 17, Elon Musk replied to a tweet about his connection with Bitcoin saying, “To clarify speculation, Tesla has not sold any Bitcoin.” This saved Bitcoin’s value from plummeting further and stopped the fall at around US$45,000.
A week later, Elon Musk addressed the issue about Bitcoin’s environmental impact by acknowledging North American Bitcoin miners’ plan to switch to renewable usage as “potentially promising”. This resulted in a 4% price spike.
It’s important to note that Elon Musk’s tweets are not limited to Bitcoin. The Tesla CEO had his share of influence on Dogecoin. In May, he tweeted about working with the developers of Dogecoin, the meme cryptocurrency, sending its price up by 30%. In another tweet, the billionaire announced that his other company SpaceX would start accepting Dogecoin for payments. Without a surprise, this made Dogecoin’s price skyrocket. He also vocalized his support for the meme crypto coin by calling him a “Dogefather” in one of his tweets.
Too many experts and serious investors, these price manipulations are big red flags. Keeping aside the fact that the cryptocurrency market is extremely volatile, Elon Musk’s impact on the crypto market makes it riskier to invest in cryptocurrencies. Once a supporter of Bitcoins and later puzzled by his own decision, what more can he do is the question that is asked a lot.
Director of data and indexes at CoinDesk, Galen Moore has a similar opinion. “In cryptocurrencies, it’s as important to understand memes and the social layer as it is to understand the technology and game theory that makes Bitcoin a secure network. It also raises uncomfortable questions about price manipulation”, he said.
While all of Elon Musk’s tweets have a direct impact on the crypto prices, it’s difficult to be sure whether he actually sold the Bitcoins after the tweets or not? All cryptocurrencies are not subject to US securities law, hence they are often overlooked. For this, the Securities and Exchange Commission has been urging to rectify the lack of regulations and potential for fraud and manipulation regarding cryptocurrencies.
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