How to make money from cryptocurrency
How Elon Musk is manipulating the cryptocurrency market and why he is doing it
Anastasia Skrynnikova
Cryptocurrencies have proven susceptible to Elon Musk's tweets: one statement from him can make or break the price of digital money. How long will this influence last, and can crypto investors lay claim to Musk?
On Wednesday, July 21, billionaire and Tesla CEO Ilon Musk admitted during The B Word conference on bitcoin that he owns Ethereum in addition to bitcoin and Dogecoin itself. After this statement, the price of Ethereum rose by 12% and exceeded $2000. This is not the first time that the price of digital money has changed dramatically after Musk's remarks. Why is the billionaire manipulating the $1.3 trillion cryptocurrency market?
Rise and fall
"Looking back [we realise that] this was inevitable," Musk wrote on his Twitter on 29 January 2021 and added the hashtag #bitcoin to his profile description. That hint was enough for investors - bitcoin shares instantly soared 20% to $37,700.
Tesla soon announced that it had invested $1.5 billion in bitcoin and would accept bitcoins as payment for its products. Just eight days later, on February 16, bitcoin broke the record $50,000 mark - by then the cryptocurrency had risen 72% since the start of the year.
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However, in May 2021, the entrepreneur announced that Tesla was suspending the acceptance of bitcoin payments for electric cars due to the unenvironmental way of mining the cryptocurrency. As a result, bitcoin fell 15% to $46,200. At the same time, Musk said that the company would not sell the cryptocurrency. A few days later, the value of the cryptocurrency fell again - below $45,000 - this came after Musk's discussion on Twitter. The billionaire agreed with one social media user, who wrote that bitcoin owners would be annoyed if they found out Tesla had gotten rid of its remaining cryptocurrency assets in the next quarter. "Indeed," Musk replied.
That said, the billionaire revealed during The B Word conference that he would continue to keep cryptocurrency in his portfolio. "If the price of bitcoin drops, I lose money. I can swing [cryptocurrency], but I'm not dumping [it]," Musk said during the event. He also said that Tesla will accept bitcoins in the future when mining becomes more environmentally friendly.
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Another cryptocurrency that Musk is also able to influence is Dogecoin: it originated as a joke and is symbolised by a meme with the contented face of a shiba inu dog. In early February, Musk published a photo of a Falcon 9 rocket in flight and captioned it Doge. In less than an hour, the value of Dogecoin rose 47% to $0.059 per token.
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Two days later, Musk called Dogecoin "the people's cryptocurrency", and a little later wrote that he bought it for his son X Æ A-12. "Dogecoin may be my favourite cryptocurrency," Musk wrote back in April 2019, when users of the cryptocurrency's Twitter account jokingly chose him to head his project.
Ahead of the Saturday Night Live show, which Musk was due to host on 8 May, Dogecoin rose in value by 30%. And after Musk's speech, in which he firstly admitted that he has Asperger's syndrome and secondly called Dogecoin "hype", the cryptocurrency's stock plummeted by 28%. Dogecoin's price was $0.65 at the start of the show and $0.47 a few hours after the show ended.
The Musk factor
"Ilon's influence [on the cryptocurrency market] will not last forever," Ethereum cryptocurrency creator Vitalik Buterin told CNN in a May 2021 interview. He noted that the cryptocurrency space first encountered Musk's tweets in 2020. However, Buterin believes that markets will learn to cope with his impact in the future.
Elon Musk is well aware of the consequences of his actions and statements, according to Exante's lead strategist Yiannis Kivkoulis. According to him, Musk may be interested in the very process of influencing the market and how cryptocurrency quotes change. The successful experience of "rocking" Doge may encourage him to try to do it again, Kivkulis believes.
The bitcoin's fall in spring 2021 was something of a blow to Musk's reputation, the expert continues, as such a dramatic change in Tesla's financial policy looked like a deception to the expectations of investors who were focused on Musk. "Over time, the impact of Musk's statements on investors has diminished. Now he has returned to the ranks of bitcoin supporters. This can be seen as a rational decision, as Musk himself, Tesla and Space X have bitcoins, according to the entrepreneur's statements, and a fall in the cryptocurrency rate is not beneficial to him," Kivkulis believes.
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Musk has 59.4 million followers on Twitter, his publications are reprinted by all media and read in the cryptocurrency community, but his impact on cryptocurrency