Musk’s Influence Over Crypto May Be Waning
July 27, 2021
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by Stephen Kanyi

Elon Musk tweets and the market moves. This has been the story of the crypto world for at least the last few months. Known as the ‘crypto father’ Elon Musk is probably the most influential person on the crypto market.

The “Elon Musk effect” as it is called today is probably one of the most powerful in the industry. One little tweet and the price of either Bitcoin or his pet project Dogecoin could go skyrocketing or plunging.

When he added “#bitcoin” on his Twitter profile for instance, in January early this year, it sent the price soaring by nearly 20%.

In February he announced that Tesla Inc had bought 1.5 billion worth of cryptocurrency, prices jumped by 16%.

Two months later he rescinded this decision when he tweeted that Tesla would no longer accept Bitcoin as payment for Tesla vehicles. This caused a 50% fall of Bitcoins price after it had just peaked at $65,000 in mid-April.

In his appearance on Saturday Night Live, Elon Musk admitted that dogecoin was a “hustle.” This one-joke sent the price of Dogecoin down to levels never seen since the start of the year, angering a lot of investors some of whom had placed huge bets on the ‘joke’ digital currency.

Criticism

Musk’s disproportional influence over the crypto market, not to mention his wealth, has understandably attracted a lot of criticism.

Speaking to the Wall Street Journal Peter Atwater lecturer of economics at The College of William & Mary attribute Musk’s actions to a ‘rebellious aspect’ of his personality.

If you look at cryptocurrencies and electric vehicles, there are at least two attributes that I think appeal to youth—one is that they’re incredibly futuristic…and they’re also rebellious,” he said.

Lark Davis, a bitcoin investor based in New Zealand was more critical saying “Someone like Musk doesn’t care about your financial health. He is having fun, and you are going to go broke investing in a meme.”

Musk is however not alone in using social media to influence markets. Other celebrities and public figures have also in the past used platforms such as Twitter Reddit and even new-comer Clubhouse to voice their opinions on digital currencies.

Barstool Sports Inc. founder Dave Portnoy for instance, shocked his audience when he live-streamed himself placing bets on stocks based on letters he randomly pulled out of a bag.

Others have however been more rational. Cathie Wood, a portfolio manager, is well-known for her investment acumen.

Such influence is not however restricted to the crypto market. Names like Gerald Tsai and Peter Lynch, two of the most successful and consequentially the greatest influencers in mutual funds markets, are just a few examples of how susceptible investors are to influencers, no matter the market. And of course, who can forget Warren Buffet, the Oracle of Omaha.

Waning Influence

Elon Musk’s influence over digital currency however seems to be waning. After his break-up with Bitcoin when he announced Tesla’s U-turn on the digital currency, investors seem to be less susceptible to his opinions.

Late last month his tweet “Release the Doge” that featured a Godfather-inspired meme with actor Marlon Brando in the picture barely affected the price.

He tweeted the following day showing a man on his laptop focused on dogecoin and the game Polytopia on the screen. This again did not have a significant effect on the market.

“It seems that investors are no longer listening and are finally realizing that the tweets of one man should not be the deciding factor for whether they buy or sell their assets,” says Alexandra Clark, sales trader at UK-based digital asset broker GlobalBlock.

Kevin Kang the co-founder and principal at BK Capital explainsI believe the more he tweets, the more immune the market will get in the future but for now, he’s definitely one of the big influencers of the Bitcoin market.”

Perhaps the influence that Musk had over the market was just a passing fad. As the market matures, however, we will see seasoned investors having more influence in this market. A better choice in my opinion.

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