When Tesla CEO Elon Musk revealed his company’s commitment to Bitcoin (BTC) and announced the launch of crypto payments, BTC took off to hit its all-time high. However, shortly thereafter, Musk began tweeting about concerns about the environmental impact of BTC and Tesla’s reversal of its crypto payments policy, causing Bitcoin to lose half of its value and the entire crypto market to surrender. In short, Musk is tweeting lukewarm support for crypto, and prices are rising; Musk posts a meme indicating his “breakup” with Bitcoin, and prices go down.
For a sector that values disintermediation and widespread distribution of economic power over everything, the cryptocurrency space has given a single man far too much sway over his wealth. The hope is that sooner rather than later the crypto market will overcome its musk addiction. At this point, however, the tech mogul’s Twitter talk is one of the most influential exogenous factors driving the prices of digital assets.
Who, at the end of the day, is Mr. Musk for the crypto industry – an eccentric friend, an adversary, or just a billionaire having unlimited fun playing around with a trillion dollar market?
While it’s impossible to know what the controversial billionaire is up to, there is room for judgment about what his presence can mean for the industry in the long run – as well as educated guesswork about his attitudes and motivations.
Crypto influencer # 1
To date, Musk’s impact on crypto asset values shows no signs of decline. Most recently, Musk tweeted a response to a Cointelegraph article in which he casually spelled out the terms that could cause Tesla to resume the practice of accepting Bitcoin transactions. And guess what happened next? That’s right: Bitcoin regained a few thousand dollars overnight.
This is exactly what concerns BTC and can therefore be described as “serious”. A separate chapter in the Musk Crypto saga is his – presumably tongue-in-cheek – stake in various altcoins that can multiply their market capitalization within hours in response to his tweets. From the systematic support of Memecoin boss Dogecoin (DOGE) to more obscure but poignant items like the porn industry-related coin CumRocket (CUMMIES), Musk has been involved in some price movements.
The negative effects of Musk’s antics on the crypto industry are well documented. First and foremost, there are individual investors who took inspiration from the Tesla CEO to do business that cost them more than they could afford to lose. Certainly there are many others who suffered losses even without direct attention from Musk and fell victim to the market-wide slumps that triggered his antics.
At the industry level, the recent storms of volatility stand in the way of further strengthening the reputation of digital assets as a mature and safe asset class. As a newbie looking for an alternative place to park your money, how likely is it that you find yourself excited about an investment that can drop 40% in one day after a random tweet? A related problem is that such malleability for potentially malicious market manipulation can draw unwanted regulatory attention to the cryptocurrency space.
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Some still believe the volatility Musk is sustaining has an advantage, as Mati Greenspan, founder and CEO of financial advisory firm Quantum Economics, told Cointelegraph, “Musk’s involvement in the crypto space is positive overall. Volatility has long been celebrated as a volume driver and with its introduction. “
Others, however, agree that the negative results far outweigh any positive results from Musk’s crypto-related advertising. Dean Steinbeck, co-founder and chief operating officer of blockchain solutions provider Horizen Labs, told Cointelegraph:
“Musk’s behavior has hurt crypto badly. First, he perpetuated the Red Hering argument that Bitcoin is bad for the environment. This argument is wrong and is sustained by projects with ulterior motives. Second, Musk draws his attention from his amateurish tweets that support bullshit meme coins that have no material value. “
Steinbeck went on to say that Musk was “nothing more than a sociopathic billionaire who knows next to nothing about crypto but considers himself an expert”.
Many in the crypto space are wondering what Musk’s motivation is for issuing often contradicting but reliably market-moving tweets. Could it be as low and crude as manipulating coin prices to make a profit? Or are the tweets perhaps a by-product of a gullible learning process with all its bumps and twists? Or is a lot just for fun?
The fun hypothesis seems particularly influential, and some crypto market participants aren’t amused by it.
However, other crypto influencers are ready to help Tesla CEO when in doubt. Brock Pierce, cryptocurrency investor and chairman of the Bitcoin Foundation, doesn’t believe Musk’s actions involving digital assets are malicious, and tells Cointelegraph:
“As it appears [Musk] was very responsive to the differing opinions and insights when stepping into the crypto “rabbit hole” but I don’t think it was opportunistic. I think he’s trying, like what he’s doing in many industries, to get deeper and deeper into her understanding. Education is not a linear path and he goes through his own process and does so very publicly because of his large following. “
Pierce added that given that the cryptocurrency community tends to be lenient, Musk could still be a very important advocate for the space, provided his intentions prove to be true in the medium and long term.
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With regard to the latter perspective, opinions differ widely. When asked if Musk had finally ruined his reputation with the crypto community, Greenspan replied:
“Definitely, yes. The people in space are tired of his capricious interventions in the markets. “
Greenspan summed up popular opinion by saying that while many like to join in, most are really jaded.
If the latter is the case for a critical mass of crypto market participants, this could be good news. It will take considerable “musk fatigue” to break the “musk spell” and free the entire asset class from the whimsical influence of a single powerful person.