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Musk Effect on Cryptocurrency

The billionaire Tesla CEO has a huge influence on crypto, all through the power of his tweets.
October 4, 2021
8 mins read

Whether you are actively involved in crypto trading, or you are simply a bystander who happens to watch the news constantly, you most likely have heard about Tesla CEO Elon Musk and the ups and downs of the crypto world, based on his influence. Particularly in 2021, an entire book could be written on the drama surrounding Elon Musk, Bitcoin, Dogecoin and Tesla. Depending on when you purchased or held Bitcoin in 2021, you would have either love and admiration, or a reasonable degree of dislike for the tech entrepreneur. Many Bitcoin and cryptocurrency traders attributed a positive period of growth this year due to the entry of Elon into the Bitcoin markets. The billionaire literally influenced demand and value of Bitcoin through a series of events, which made this year even more eventful, in the crypto world.

Elon Musk and Twitter

If there is anyone who has exerted any level of influence on the world of cryptocurrency, it is Elon Musk. He has more or less amassed considerable power, enough to influence the market with a single tweet. With more than 55 million followers on Twitter, every post by Elon Musk is a potential market mover as long as the post is on the subject of cryptocurrencies.

The SpaceX CEO made his biggest impact on the cryptocurrency scene on May 19, a day when the entire sector almost lost up to $1 trillion worldwide at one point. That same day, Bitcoin, which is practically the most valuable cryptocurrency, lost more than half of its value from a record high, which it had just attained the previous month. It dropped from a record high of $64,895 to $30,066. Ethereum, another cryptocurrency, also dropped nearly 57%, to $1,850, its weakest position since late January 2021. These series of crypto events signify the effect Twitter has on crypto markets, as well as the effect Elon Musk has on online traders, crypto holders and business people in general, when he wields his social media influence.

The interesting thing about these tweets is that they do not necessarily give advice to the general public, or tell crypto holders whether they should sell or buy more crypto assets. They are simply reflections of what Elon Musk thinks about the direction of the Bitcoin markets, or his intentions with respect to acquiring or dumping crypto assets.

Measuring the Musk Effect

It would be quite difficult to mathematically determine how much of an influence Elon Musk has over the direction of Bitcoin markets and the entire cryptocurrency world.  Different actions by Musk this year have affected the markets in different ways. The Elon Musk Bitcoin saga properly began in January 2021, when he changed his Twitter bio to #bitcoin. This was on Jan. 29, 2021. After this tweet, the value of Bitcoin rose from about $32,000 to almost $38,000.

Many experts and industry personnel have commented on the crypto events involving Elon Musk and his company, Tesla Inc. Neeraj Khandelwal, the chief technology officer and co-founder of CoinDCX stated, “Recent comments by some Industry stalwarts such as Elon Musk might have also contributed to some corrections in the pricing.” These comments seem to be accurate. The Elon Musk Bitcoin saga continued when a single tweet from Elon Musk caused bitcoin prices to drop drastically. At some point in May 2021, the price of Bitcoin tumbled from about $65,000 to $45,000. There was a tweet that said:

“Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their #Bitcoin holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

Elon Musk simply replied to the tweet by saying, “Indeed,” and the deed was done. He however clarified by stating that Tesla wouldn’t be selling any coins, but it all seemed to be a bit late by then.

The influence of Elon Musk on the market was also evident when on May 13, 2021, he announced Tesla will no longer allow vehicle purchases using Bitcoin. Musk and the company cited environmental concerns, commenting that the general idea of cryptocurrency is a good one on many levels, and that the company believes that it does have a promising future. According to them, however, this “comes at great cost to the environment.” They announced that Tesla will not be selling any of its acquired Bitcoin but we will see transactions for the moment. They stated their resolve to resume crypto transactions as soon as “mining transitions to more sustainable energy.”

Crypto Statistics

Many numbers and percentages have been published by observers on the effect of Elon Musk on cryptocurrency in recent months. In summary, the announcement by Musk in regards to the involvement of Tesla in the market caused a 10% plunge in Bitcoin soon after the aforementioned tweet.

In addition, Musk released some tweets regarding Dogecoin recently. These tweets, which interestingly began as a social media parody, caused a rise in the digital currency, to the extent that Dogecoin has now surged to the point of being the fourth-largest cryptocurrency in the world when ranked by market cap.

Musk also tweeted around April, randomly urging people on Twitter to move to Starbase, as he called it. He stated that “Starbase will grow by several thousand people over the next year or two.” Soon after his tweet, a particular cryptocurrency that was actually known as Starbase Token, experienced a surge of about 6000%.

Concluding Remarks

No one knows if the Elon Musk Bitcoin saga was intentionally instigated by the Tesla CEO. However, he did not put a price on Bitcoin, nor did he urge millions of people to begin selling Bitcoin after releasing his tweet. While it cannot be denied how much influence he has on the markets in general, he cannot be said to have done anything particularly wrong. What places a price on Bitcoin is the market situation, and legally, Musk cannot be held liable for his tweets’ effects on crypto, either by the Securities Exchange Commission, or any other body. Since there are no reports that Tesla sold their acquired crypto assets, what is to be observed going forward is whether renewable energy will be used for mining efforts anytime soon, and whether Tesla will indeed get back to buying and selling Bitcoin (or making other Bitcoin transactions) when this happens. All the relevant information will surely be provided on Redot.com.

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