Bitcoin

The “Musk Effect”: Bitcoin Soars 14% on Tesla CEO’s Twitter Mention

Posted by MoneyController on 08.02.2021

Every time Elon Musk tweets about a random company, its share price goes wild. Most recently, Bitcoin surged 10.2% to $36,901 following one of Musk’s “random” Twitter mentions. The big question on everyone’s mind, now, is whether these seemingly lighthearted tweets are helpful or harmful and what can or should be done about it.

Noteworthy tweets

It all began earlier this month when messaging app Whatsapp stated that it was going to change their conditions of use and that they were going to share users’ information with Facebook. Many were worried about their privacy being invaded and began looking for alternative apps. Musk urged his almost 50 million twitter followers to use encrypted messaging app Signal, tweeting “buy Signal”. Investors immediately rushed to buy up shares of the company. But it turns out some mistakenly bought shares in a small components producer called “Signal Advance”, sending its stock up 1,100%.

Then, shares of game developer CD Projekt increased 16% last Thursday after Musk tweeted: “The aesthetics of Cyberpunk are incredible”. And again, Musk boosted online platform Etsy, whose stock jumped 9% on last Tuesday, after he tweeted: “I kinda love Etsy”. This came after he had acquired “hand knit wool Marvin the Martian helm” for his dog through the platform.

And then came the GameStop short squeeze, which came about after a group of Reddit users called “WallStreetBets” began buying up loads of GME stocks. The group managed to grab Musk’s attention, who eventually tweeted “Gamestonk!!” – a Tweet that included a link to the Reddit stock trading discussion group. Musk’s “endorsement” helped push GME’s share price movement upward and onward at astounding rates.

The last straw?

Now Musk seems to be extending his interest and Twitter trigger fingers to the cryptocurrency space. Last Friday he used a the “#bitcoin” hashtag on his Twitter profile page, leading to a 14% jump in the cryptocurrency that same day. Bitcoin’s value jumped $38,566, fueling wide speculation that he had bought more of the cryptocurrency. But some worry Musk’s Bitcoin action might not be as innocent as many had thought. Just last December, Musk talked about the opportunity of converting “large transactions” of Tesla’s assets into bitcoin in a Twitter exchange with important bitcoin users.

Mixed feelings

Some experts consider Musk to be the “ultimate influencer” and a “new brand charismatic leader with a public platform that is not limited to a boardroom”. Steven Bartlett, a prominent tech investor, said “the public markets now have influencers like fitness and beauty do.” On the other hand, some experts believe Musk’s behavior is contradictory. They argue Musk is taking advantage of his ability to instigate massive market events, while also going against what he considers unnatural market forces in short selling. Many observers say Musk’s behaviour is dangerous and irresponsible and could have devastating consequences for retail companies while he and his friends enrich themselves at the expense of the people. Ex-Googler, Rich Pleeth, entrepreneur and tech investor in London, said that Musk can “enrich himself with one tweet” and added “He is an innovator, but that doesn’t mean he’s above the law”. Freetrade analyst, Dan Lane, also stated that “regulators don’t just need to catch up, they need to proactively enforce rules and clarify what is acceptable … and that goes for the shorts, too.” 

 

 

 

 

 

 

 

TODAY’S MOST READ ARTICLES

MOST READ ARTICLES OF THE WEEK

MOST READ ARTICLES OF THE MONTH

MOST READ ARTICLES IN THE FINANCIAL FORUM

View classification