It is important to note that anyone who is even remotely aware of cryptocurrency, in general, is well acquainted with the name Elon Musk. The current CEO of SpaceX, Tesla, and The Boring Company, Elon Musk has over 55 million followers on social media handles. Needless to say, his opinion on cryptocurrencies like bitcoins has a great influence on people’s preferences.
Elon Musk has shared a very tricky relationship with bitcoins. When bitcoin was first introduced, he was greatly in favor of the newly developed model of cryptocurrency. However, with time he expressed negative opinions about bitcoins, and recently, he expressed that Bitcoins and other forms of cryptocurrencies are in fact, terrible for the environment.
Elon Musk generally expresses his opinions via tweets and the market seems to greatly react in accordance to these tweets. As per sources, his tweets are often followed by a surge or a dip in trade volumes of bitcoin and other cryptocurrencies.
Elon Musk, Twitter, and Bitcoins
Musk’s tweets are popular for his pronouncements on cryptocurrencies, especially bitcoin. To know more about bitcoins, visit cryptosoft.
In 2014, Elon Musk described bitcoins as “probably a good thing” on Twitter. This tweet alone generated rumors that Elon Musk was Satoshi Nakamoto, a pseudonym for the founder of Bitcoins. However, Elon Musk refuted such claims and declared that he, in fact, lost a bitcoin that was gifted to him by a friend.
By 2019, Elon Musk had embarked on a more committed crypto journey. He even started considering whether he should incorporate bitcoin technology into his existing business models. When news of bitcoin investments by companies such as Square and Microstrategy were afloat in the market, Tesla announced that the company had invested $1.5 billion in Bitcoins. It was also announced that Tesla cars could be purchased by bitcoin transactions.
These announcements by Elon Musk on Twitter boosted the growth of crypto transactions. This was mainly because a corporate giant like Tesla backing the bitcoin technology only added to its credibility in the market. In fact, the price of Bitcoins reached its all-time high value of $58,000 soon after these tweets.
The Relationship goes Downhill
In April 2021, almost 10% of Bitcoin holdings were sold by Tesla. This caused a great panic amongst investors. However, Elon Musk soon clarified that Tesla was only testing the liquidity of Bitcoins and that he still possesses significant bitcoin investments.
Soon after this incident, Elon Musk tweeted questioning the environmental impacts of bitcoin transactions. Elon Musk announced that in an attempt to cut down on energy consumption, Tesla would no longer accept Bitcoin payments. This sent the bitcoin market into a downward spiral and discouraged many investors. Eventually, this caused the price of Bitcoins to fall to nearly $30,000.
However, Elon Musk took to Twitter in May, to show his support to miners in their efforts to make the process of bitcoin transactions more eco-friendly. As a consequence of these tweets, the value of bitcoins jumped by 19% and rose to $39,944.
Elon Musk’s Tweets and Bitcoin Volatility
Although it may appear that Elon Musk literally can control the Bitcoin market with his tweets. However, a deeper analysis of the cryptocurrency market says otherwise. The price volatility followed the cycle of Accumulation, Markup, Distribution, and Markdown, just like any other asset. There is no doubt that Elon Musk’s tweets negatively impacted the value of bitcoins this year. However, this fall in prices was not sudden or solely attributable to Elon Musk.
Conclusion
Elon Musk’s views have always impacted the investors’ sentiments. His tweets questioning the environmental impacts of Bitcoin transactions earlier this year negatively impacted the bitcoin valuation. However, Elon Musk’s opinion is not the only factor behind the market volatility of bitcoins. It must be borne in mind that price volatility is a defining characteristic of any new asset class and attributing such volatility of a global asset like bitcoin to one single person seems unwise.