Elon Musk’s continuing ability and inclination to move the prices of Bitcoin and Dogecoin with his slightest whim. Even if you know only the basics about Bitcoin, you’ve probably heard the word “decentralized.” It means that the digital currency is not tied to one central authority, so it’s not subject to a single possible failure. But if you’ve followed headlines about Bitcoin, you know that the currency’s success can hinge on one man tweeting breakup memes.
Last week, the Wall Street Journal reported that the Securities and Exchange Commission has told Tesla that it has failed to keep its CEO’s tweets in check, as required by a 2018 securities fraud settlement. Elon Musk is supposed to run tweets that could affect stock prices or the market through Tesla’s communications team, but that’s not working out too well.
- He definitely has the power to move Bitcoin and Dogecoin prices whenever he feels like it.
- He definitely exercises that power with some frequency and with no apparent pattern.
- He definitely has the money to buy lots of Bitcoin and Dogecoin before making them go up.
- If he did do that, he probably would not have much in the way of disclosure obligations, at least not real-time disclosure obligations. 2
- Similarly he could easily sell them before making them go down, without much in the way of disclosure obligations.
- The regulation and policing of Bitcoin and Dogecoin trading are rather less comprehensive and aggressive than the regulation and policing of stock trading.
Soon after the Journal story published, Musk copied and pasted a breakup meme, added the hashtag #Bitcoin and a Bitcoin emoji followed by a broken heart emoji. The move sent the value of the cryptocurrency tumbling and took digital currencies ether and dogecoin down with it.https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=true&id=1400620080090730501&lang=en-gb&origin=https%3A%2F%2Fuk.pcmag.com%2Fold-cryptocurrency%2F133826%2Fnever-tweet-how-elon-musk-is-ruining-the-promise-of-crypto&sessionId=efe298b2104cb287c21f54bce0a3bd878fc4cae0&siteScreenName=pcmag&theme=light&widgetsVersion=82e1070%3A1619632193066&width=550px
Cryptocurrency traders love memes, but it’s been live by the sword, die by the sword for them, particularly when it comes to Musk. When Musk hosted Saturday Night Live a month ago, he joked about dogecoin—a meme-inspired cryptocurrency he has regularly hyped—being “a hustle” and the value plunged nearly 30%. A week later, he gave the virtual currency a boost by tweeting that he was working with developers to improve its transaction efficiency.
In January, Musk added #bitcoin to his Twitter bio, which was enough to boost the cryptocurrency by 20% (it has since been removed). A few days later, Tesla bought $1.5 billion in bitcoin and said it would accept the currency as payment for vehicles, sending the price to a record high. Three months later, Musk tweeted that Tesla would no longer accept Bitcoin, citing the environmental effects of cryptomining, causing its value to drop 10%.
Tesla definitely has sold some Bitcoin (in March), though, so you have to interpret that one a bit. Presumably he meant it hasn’t sold between the disclosed sales in March and the time he hit send on that tweet, but I can’t be sure about that.
Here is the Friday Dogecoin tweet, which I guess was a follow-up to his tweet on Wednesday that made Bitcoin go down by 15%. “Working with Doge devs to improve system transaction efficiency. Potentially promising.” Is Musk working with Dogecoin developers to improve its efficiency? Do you care? “System transaction efficiency”? Here is a claim that he’s been doing that — with “the team of four part-time Dogecoin developers” — since 2019. He tweeted it Friday. The point that I want to make here is that if he tweets today “these Dogecoin developers are kind of lame, they don’t laugh at my jokes,” he will wipe billions of dollars off of Dogecoin’s market cap in 10 minutes. And then if he tweets tomorrow “but they’re good developers, I like them anyway,” he will add billions of dollars to Dogecoin’s market cap in 10 minutes. And then if he tweets on Wednesday “but I just don’t think our partnership is working out,” it will subtract billions of dollars. And then if he tweets on Thursday “ah we resolved our issues and now Dogecoin will be legal tender on Mars,” it will add billions of dollars. And I can keep typing these things until you’re bored, but Elon Musk can keep typing these things and make money come out each time.
Here’s the Sunday Bitcoin tweet (“Indeed”), and here’s the overnight clarification. Did Tesla sell its Bitcoins before Musk tanked the price on Wednesday? Or after, but before he tanked it again on Sunday? Is Tesla buying more now? Who even knows. The point here is that (1) it could have, (2) he is messing with us, and (3) whether he is messing with us by whipsawing the price of Bitcoin and trading it or by whipsawing the price of Bitcoin and not trading it doesn’t matter that much; either way is bizarre and incredible.
In an ideal world — in a good fairy tale — Musk would lose the lamp and it would be found by some impoverished urchin, or by me. This magic power really is wasted on the second-richest person in the world! Still it is amazing.
Yet more of this
Meanwhile here is, allegedly, a bot that buys Dogecoin when Musk tweets about it. Nothing in this newsletter is ever investing advice, I own no Dogecoin or Bitcoin, my money is in dumb index funds, and yet a part of me thinks it is weird to have any investing strategy other than “buy Dogecoin or Bitcoin when Elon Musk tweets nice things about them, and sell them when he tweets bad things about them.” What is finance, these days, but that? “Surely at some subconscious level people want to order their lives in accordance with the cryptic instructions of a charismatic flying zillionaire,” I wrote way back in February, and you could automate that.Sponsored ContentResilience Through Digitalization and SustainabilityYokogawa
Elsewhere here’s a Dogecoin millionaire:
“Dogecoin has the best branding of all cryptocurrency,” he said. “If you put in front of me all the symbols of Ethereum, Bitcoin, Litecoin — everything just looks super high tech and futuristic. And Dogecoin just looks like: Hey, guys, what’s up?”
He imagines that newbies investing in cryptocurrency for the first time might gravitate toward something fun and recognizable, and that Dogecoin might eventually become a kind of on-ramp to the larger world of virtual money.
“I feel like eventually we’re all going to be buying and selling things with memes, and Dogecoin is going to lead the way,” he said.
Strange as his investment thesis might seem, it’s hard to argue with the results.
It’s not even strange! The thesis in buying any non-cash-flowing asset — Dogecoin, Bitcoin, gold, art, whatever — has to be “other people will want to buy this thing too,” and some sort of mass-psychology story — “other people will want to buy this thing because it’s fun and approachable” — seems like the most reasonable way to support that thesis. We talked the other day about a company that paid Elon Musk in Dogecoin to launch a satellite into space, as a way to make the price of Dogecoin go up. I said: “Really if postmodern finance is primarily a matter of mass psychology, isn’t it … marketing?” If you’re going to pick a cryptocurrency to buy, why wouldn’t you pick the one with the best branding? What else is there?
These ups and downs raised the ire of hacktivist group Anonymous, which released a video accusing Musk of trolling cryptocurrency markets.
Setting aside all else that can be said of the hagiography around Musk and the influence that goes with it, the impact of his words (and sometimes emoji) on cryptocurrency has served to expose one of its weaknesses. Those who wield enough power in the market can manipulate it.
Self-styled “crypto analyst” Mr. Whale on Twitter replied to Musk’s breakup meme tweet with: “Bitcoiners arguing that its [sic] literally impossible to manipulate the price of Bitcoin….while simultaneously crying that Elon Musk is manipulating the price of #Bitcoin is peak hypocrisy.” Musk himself responded with an emoji of a finger pointing to the tweet.
This is not a shocking economic reality when it comes to other markets, but for a form of currency that is touted as being the answer to those who wish to divest themselves of government control of currency, it’s devastating. The complexities of buying and using cryptocurrency put it beyond the grasp of the average consumer. Bitcoin and its brethren reside primarily in the digital wallets of the technocracy. When those who hold the currencies bend to the whims of Musk, it makes him a leader and cryptocurrency a sort of fiat.
Cryptocurrency investors may resent Musk’s manipulations, but the market is a volatile one and the majority of those who are involved in it expect big swings. They know that Musk will likely not affect their money long-term. But his antics have added value to the arguments of those who say cryptocurrency’s claims are counterfeit.
Musk well-positioned to steer cryptocurrency’s future direction of travel
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Tesla chief’s about-turn on bitcoin opens up possibility of rival digital assets gaining primacy Elon Musk’s effect on the market price of bitcoin has been hard to ignore. The cryptocurrency’s price rose sharply when he disclosed Tesla’s investment, and fell when he reversed stance © Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Richard Waters in San Francisco MAY 14 2021 235 Print this page When Elon Musk revealed three months ago that Tesla had bought $1.5bn worth of bitcoin, fans of the digital currency claimed the move would hasten its wider adoption as a tool of corporate finance. On Wednesday, however, Musk withdrew his personal endorsement, swearing off accepting the cryptocurrency as payment for Tesla’s cars and undermining the company’s justification for using it as a destination to park its spare cash. As usual, Musk’s comments provided immediate fuel for crypto traders as well as ammunition for the warring crypto tribes on Twitter. But it was harder to tell whether his announcement would have any effect on wider perceptions of the currency, or what role Musk’s views will play in the next phase of crypto adoption. “He’s always saying things every two days and isn’t consistent,” said John Coffee, a professor at Columbia Law School. Tesla’s pretensions to pushing bitcoin into the mainstream of corporate use always sounded secondary to its interest in pure financial speculation, Coffee added. “I think his first investment was much more of a currency investment than anything else.” Whatever lies behind Musk’s on-again, off-again love affair with bitcoin, his effect on market prices has been hard to ignore. The currency’s price jumped 15 per cent on the day that Tesla’s investment was revealed, and fell 6 per cent in the 24 hours after this week’s announcement.
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The latest drop came just days after Musk jokingly denounced dogecoin — another cryptocurrency that he had heavily promoted — as “a hustle” on US television, sending its value down 15 per cent. “Without question, he’s become the single most important factor in crypto” when it comes to moving prices, said JP Thieriot. His influence also extends to shaping how people think about digital currencies, Thieriot suggested. Even Musk, however, can’t force cryptocurrencies into mainstream commercial use. He said this week that Tesla had backed away from accepting payment in the currency because of the environmental effects of the energy-intensive “mining” that goes into validating transactions — a well-known issue he has ignored in the past. Many crypto experts said that Musk’s change of heart appeared to reflect an acceptance that bitcoin was not suitable for payments. Other companies that had accepted bitcoin as a form of payment in the past, including Dell and Microsoft, also later dropped it. “I don’t think a lot of people want to spend their bitcoin,” said Wilson Withiam, an analyst at crypto research group Messari. “If there was actual money behind it, would [Tesla] have actually done that?” Musk’s change of heart extended beyond the issue of payments. He also swore his electric carmaker off becoming an active participant in the bitcoin market, saying that it “will not be selling any bitcoin”. The commitment came two weeks after Tesla surprised Wall Street with a $101m profit from selling part of its holdings, raising worries that the company’s performance would increasingly be tied to crypto trading. The pledge not to sell may have reassured some investors, but it also effectively undermined Tesla’s case for using the currency as part of its everyday corporate treasury operations.
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Musk did not immediately show his hand about which cryptocurrency will win his favour as he turns away from bitcoin, but he did hint. On Thursday, he tweeted: “Working with Doge devs to improve system transaction efficiency. Potentially promising.” He said that Tesla wanted to use a token that consumes less than 1 per cent as much energy as bitcoin, a comment is bound to leave crypto investors guessing — and guarantee that all eyes stay fixed on his tweets for the next clue to his thinking. Climate Capital
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Elon Musk Life 