In today’s BeInCrypto video news show, Jessica Walker analyzes the unmatched influence the richest man alive has recently had on bitcoin (BTC).
On Monday, Feb 8, Tesla surprised the crypto community by announcing a bitcoin (BTC) purchase to the tune of $1.5 billion. The leading cryptocurrency immediately broke its all-time high (ATH) and soared above $42,000.
But is the real elephant in the room the overwhelming influence that Elon Musk has on the BTC price?
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Bitcoin Mentions Becoming More Frequent
The saga surrounding Elon Musk’s Bitcoin tweets started as far back as March 2014. Initially, Musk denied that he owned bitcoin. But after he was rumored to be the real Satoshi Nakamoto in 2017, Musk announced his first holding.
Things went quiet for a while, and in 2019 the narrative started to turn bullish. Elon started tweeting positively about Bitcoin, praising some of its key features. Meanwhile, he noted that cryptocurrency was not on Tesla’s radar.
In 2019, Elon’s tweets didn’t have a significant effect on the market. In January he randomly tweeted:
As the coronavirus pandemic took over, Musk went silent again, until the end of the year. Then he followed up with some rather mysterious Bitcoin-related tweets.
Conveniently, bitcoin was again going through a bull run, a massive one that took it past $42,000. Elon’s holdings were now worth five times as much as when he disclosed he owned 0.25 btc.
Investors Getting Worried
Since then, Elon has been speaking openly about Bitcoin on Twitter and in interviews. On Jan 29, he added “#bitcoin” to his Twitter bio, which impacted the Bitcoin market. The BTC price posted a Cumulative Abnormal Return (CAR) of 6.31% in 30 minutes. This increased to 13.19% after an hour, reaching a height of 19% over seven hours.
A working paper published by Blockchain Research Lab says Musk’s cryptocurrency tweets create “significantly abnormal returns” for Dogecoin (DOGE) as well. The study investigated the effect of Musk’s one-word DOGE-related tweet in December. It showed an impact on the meme coin’s CAR of 8.17 % in just five minutes. This figure peaked at 17.31% after an hour.
Musk’s influence has turned into an important fundamental factor and may be a source of concern among investors. Some have already expressed their anxiety about Musk’s visible effect. Did Tesla’s decision aggravate the situation?
CryptoWhale, a notable cryptocurrency analysis Twitter account, stated that the company might have purchased bitcoin at a lower price to take advantage of its holdings.
Meanwhile, infamous gold bug Peter Schiff reiterated the bubble narrative he holds about Bitcoin.
So the question remains, should regulators monitor, or in some way limit the endorsements of influencers?