How Musk’s Tweets Affect Cryptocurrency Prices: The Elon Effect
Elon Musk was in complete control of the cryptocurrency market at the beginning of 2021. The founder of SpaceX and Tesla sent out a single tweet about dogecoin that sent prices skyrocketing by up to 50%. The world’s richest man’s view seemed to have a determining influence on the price of bitcoin for a while. A hint of déjà vu appeared on Tuesday when Musk tweeted that Tesla will take DOGE for merchandise, sending the joke coin up 43%.
Musk is by no means the only one to influence the cryptocurrency market merely by endorsing something. From meme coins to NFTs, a significant segment of the market has shown itself to be quite receptive to celebrity selling. Taking inspiration from Jeff Wilser’s Musk profile for CoinDesk’s Most Influential 2021 series, this article examines the role that celebrities and social media have had in the cryptocurrency market this year and how that role has altered.
It’s usually impossible to pinpoint the precise effect that a single event has on the market, but there is no denying the link between Musk’s acclaim and the growth of dogecoin. While other celebrities and billionaires, including Mark Cuban, have joined the DOGE bandwagon, Musk was frequently the most vocal in his attempts to send the dog cryptocurrency “to the moon.”
HIS THREE MOST IMPACTFUL TWEETS
- He expressed his passion for DOGE in a series of tweets on February 4 that caused the price to soar by over 50% in a day and by about 10% in an hour.
- “Bitcoin is now accepted for Tesla purchases”: Bitcoin reached a new high of around $65,000 within a month after the tweet, thanks in part to one of the biggest corporations in the world that accepted the cryptocurrency as payment.
- next Musk’s announcement on December 14 that Tesla will test taking DOGE for items, the price of the stock increased by 43% in the next two hours.
After some time, Musk was mentioned in relation to bitcoin, and Tesla was a major factor in the movement of prices over the spring. The market was greatly impacted by the disclosure of Tesla’s acquisition of Bitcoin, the acceptance of Bitcoin as payment, the subsequent sale of a portion of the Bitcoin holdings, and the cancellation of Bitcoin as a payment option. These actions increased the already high volatility of cryptocurrency assets.
When Tesla said on February 8 that it was buying $1.5 billion in Bitcoin, the price of the cryptocurrency shot up 19.5% that day, from $38,850 to $46,400. The quantity of Bitcoin that Tesla purchased and utilized to fund its cars was minuscule in comparison to the daily trading volume of the almost $1 trillion asset; yet, it dominated market discourse for several months.
A new kind of “Elon effect” occurred on May 12 when the CEO said that Tesla will no longer accept Bitcoin as payment. The market had already experienced a significant decline from its peak in the preceding months, but this tweet sealed the deal, causing the price of Bitcoin to drop from $56,800 to $49,500.
Due to the overall lack of regulation and maturity, as well as the inherent liquidity of permissionless, 24/7 assets, social media has a significant influence on the cryptocurrency market. In their current state, non-fungible tokens, for instance, are effectively a “tradable culture” due to characteristics like tailored assets, thin liquidity, and anonymous players that facilitate price manipulation through fictitious “wash” trades.
Consequently, the average sales price for this line of virtual trinkets virtually quadrupled in the months that followed when a celebrity, such as professional basketball player Steph Curry, bought an NFT from the well-liked Bored Ape Yacht Club collection.
