Elon’s effect: How Musk’s tweets drive crypto markets

Elon’s effect: How Musk’s tweets drive crypto markets

In the early stages of 2021, Elon Musk had a cryptocurrency market wrapped around his finger.

A single tweet about the dogecoin of the founders of Tesla and SpaceX led to a price increase of as much as 50%. At one time, the price of bitcoin seemed to rely on the opinion of the richest man in the world.

Tuesday offered a little deja vu: Musk’s tweet that Tesla will accept DOGE as a commodity sent memecoin abruptly 43%.

Musk is far from the only person who started the cryptocurrency market for no apparent reason other than their support. A significant portion of the industry, from coin memes to NFT, has been shown to be very sensitive to famous shillings.

Inspired by Jeff Wilser the profile of Muska for CoinDesk’s most influential series of 2021, here’s a look at the role of social media and celebrities in the crypto market and how it has changed over the years.

Attempts to measure the exact impact that any event has on the market are often futile, but the correlation between the rise in dogecoin and Musk’s praise is undeniable. While other billionaires (connect Mark Cuban) and celebrities jumped on the DOGE wagon, Musk was often the most outspoken in his attempts to introduce the dog cryptocurrency “to the moon”.

Muskova top 3 most influential tweets:
  • On February 4, he sent a series of tweets in which he expressed his love for DOGE, and its price rose by almost 10% within an hour and over 50% during the day.
  • “Now you can buy Tesla with bitcoin”: One of the largest companies in the world that accepted BTC as payment helped raise assets to new heights and BTC would reach almost $ 65,000 within a month of tweeting
  • On December 14, Musk announced that Tesla would launch and accept DOGE for goods on a trial basis, after which the price jumped 43% in the next two hours.

Musk eventually found himself in a conversation about Bitcoin, and Tesla played a vital role in price movements throughout the spring. The discovery of Tesla’s purchase of BTC, the acceptance of BTC as a payment, eventually the sale of part of BTC and the abolition of BTC as a method of payment, all had significant effects on the market, increasing the already significant volatility of crypto assets.

On February 8, Tesla announced the purchase of $ 1.5 billion in BTC, and the price rose by 19.5% from $ 38,850 to $ 46,400 during the day. The amount of BTC that Tesla bought and used to buy its vehicles was relatively small compared to the daily volume of trading on assets of almost $ 1 trillion, but it controlled the narrative in the market for months. On May 12, the reverse “Elon effect” happened when the CEO announced that Tesla would no longer accept BTC as a payment. Although the market has already fallen hard from its highs in previous months, this tweet put a nail in the coffin, sending BTC from $ 56,800 to $ 49,500.

However, Musk’s influence on prices declined during the year. Has the market strengthened or are participants simply tired of listening to it? Maybe the billionaire has worn out the welcome or maybe the market has become more rational. BTC was able to withstand a three-month bear market during the summer and regain April highs this fall without the continued help of Musk. DOGE has fallen from its glory, and the latest tweets on the topic of dogecoin “dogefather” have struggled to excite the market.

Or so it seemed until Tuesday morning.

The chart below shows the impact of the Musk track on DOGE prices over time, using data from TradingView.

Anyway, high profile celebrities and Twitter accounts sowing FOMO (fear of leaks) are likely to stay here.

The power of social media in the crypto market testifies to the general lack of regulation and maturity and inherent liquidity 24/7, unlicensed assets. For example, NFTs in their current form are essentially a “trading culture” with characteristics (furnished assets, poor liquidity, anonymous participants) that make up prices easy to manipulate through fake “laundry” trade. Therefore, when a star like Steph Curry bought NFT from the popular Bored Ape Yacht Club collection, the average selling price for this line of virtual tchotchkes nearly doubled in the following months.

Elon’s effect: How Musk’s tweets drive crypto markets

The market is likely to continue to mature with further regulation and innovation. If so, the influence of celebrities will continue to decline, as it seemed to Musk. While crypto natives still really like the occasional same angle (link Mongoose coin), blockchain technology has shown its potential and attracted real investors as well billions of dollars in institutional capital.

The depths of cryptocurrencies are likely to remain the Wild West, but hopefully we’ve seen the worst.

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