6 Times Elon Musk Broke the Internet (And Crypto)
Elon Musk is many things. He’s the world’s richest person, a business savant, a rocket scientist, a payments tech pioneer, a car salesman, a social media troll, a crypto influencer, and, as of late, the brand new owner of the world’s largest social media platform, Twitter. In other words, Musk has influence. This social influence phenomenon, which has come to be known as the Elon effect, has even blipped red on the radar of social scientists that have started studying what amounts to crypto markets’ reaction to Musk’s tweets.
Below we take a look at six times Elon Musk broke the internet and took the crypto markets along for the ride.
Elon Musk has 90.3 million followers on Twitter. That’s about 20 million more than the entire population of the UK. When Elon tweets, the markets react. At the end of January last year, Musk changed his Twitter bio to “#bitcoin”, causing the price of Bitcoin to jump from $32,000 to $38,000 in a matter of hours, adding $111 billion to the Bitcoin market cap. It was the beginning of what was to become a hot and cold affair with the leading cryptocurrency.
That one time Tesla bought $1.5 billion worth of Bitcoin
Through his company, Tesla, Musk owns around 43,200 Bitcoins, making him one of the largest Bitcoin whales in the world. Between January and March last year, in the months following his change of Twitter bio to #bitcoin, Tesla bought Bitcoin to the amount of $1.5 billion. Mere coincidence? Probably not. It led many detractors to cry foul, accusing Musk of what’s known as pump and dump in trading circles, in which an interested party plays up the value of a stock before selling it. In filings with the Securities and Exchange Commission (SEC), Musk explained these investments in Bitcoin as a move towards “more flexibility to further diversify and maximise returns on our cash.”
While there may have been some pumping, Musk is yet to dump his Bitcoin holdings. In March 2022, he tweeted, “It is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high. I still own & won’t sell my Bitcoin, Ethereum or Doge FWIW.”
That one time Tesla started accepting Bitcoin
The three-month period between January and March last year was a busy time for Musk and Bitcoin. In February came the announcement that Tesla would start accepting Bitcoin for payments, making the car manufacturer the first in the world to do so. “You can now buy a Tesla with Bitcoin,” Musk tweeted, leading to a bump in the price of Bitcoin.
And then didn’t
Following on the heels of this, Musk did a u-turn in June by saying that the car manufacturer would only accept Bitcoin when it was mined using 50% renewable energy. Again, the Bitcoin market responded by nosediving 10% from its previous price.
Notably, researchers from the Blockchain Research Lab found that Elon’s negative and positive tweets cancel each other out. Crunching the numbers related to 47 tweets made by Musk, the team noted that on average, price effects are only significant for Dogecoin-related Tweets but not for Bitcoin. “This is because regarding the [Bitcoin], the significant price effects of positive and negative news cancel each other out, as further classification and analysis of Bitcoin-related tweets reveals.”
Keep that Doge on a lead!
It’s unclear whether Musk actually believes in the properties of Dogecoin, the meme coin he’s been punting on Twitter, albeit less aggressively so in the last few months.
In a talk last year on Clubhouse, a social audio app, Musk said that his tweets about Dogecoin were mere jokes, but in January this year, he announced that the Tesla online shop would start accepting Dogecoin as payment for select products, including the Giga Texas Belt Buckle and Cyberwhistle. The Doge payment option seems to since have been disabled but not before the price of Doge surged 16% on the news.
So, Musk ended up buying Twitter, his pulpit from where he does most of his preaching to his 90 million followers. But what does his buying Twitter have to do with cryptocurrency? Apart from Dogecoin jumping 25% after the announcement, obviously, cryptocurrencies are on track to become the currencies of the internet, and social media platforms have long been the social hubs, or, as Musk says, the town halls of the globally connected web. At this moment, Musk, the internet and cryptocurrencies seem to be inextricably linked.
The latest from Musk was a Tesla filing to the SEC in which the company reported virtually no change in its Bitcoin holdings since a year ago. “We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash,” the filing said.