This is how business magnate and billionaire; Elon Musk describes himself to his over 54 million Twitter followers. His tweets are considered a driving force over market value, and they influence price increases or drops of commodity and financial markets around the world. Referred to by industry players as “The Elon Effect”, this is how powerful Elon Musk’s tweets have become, and it seems he knows how to use this influence very well.
Elon Musk is the CEO of Tesla, a California based electric vehicle and clean energy company, in addition to being the Founder of SpaceX, The Boring Company and Co-founder of Neuralink and OpenAI. He is a known advocate for clean energy and environmental sustainability.
Elon’s involvement in the use of cryptocurrency as a mode of payment is no secret and has severally made his opinion known whenever he took a stance; typically to promote its use.
In February 2021, his company Tesla announced that it had purchased $1.5billion of bitcoin and planned to accept the cryptocurrency as a means of payment from its customers in future. Within a day of this announcement, the price of Bitcoin surged to an all-time high from over $39,000 to $46,000. Tesla also gained from this rise in price as it made over $1 billion paper profit as a result.
On Wednesday 12th May 2021, Elon Musk took to Twitter to announce that Tesla had suspended bitcoin purchases citing environmental concerns. Prior to this, Tesla in a reported move to demonstrate the liquidity of the cryptocurrency sold 10% of its bitcoin holdings in late April 2021. Elon’s 12th May tweet quoted:
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea on many levels, and we believe it has a promising future, but this cannot come at a great cost to the environment. Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainability energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
Just under two hours following his tweet, bitcoin plunged to an estimated 17% with prices dropping from $54,819 to $45,700.
A few hours later, he shared a graph showing the energy usage trend of bitcoin’s electricity consumption over the past few months.
The billionaire ‘Twitter Influencer’ in a tweet in March 2021 endorsed the use of DeFi cryptocurrency tokens, leading to a surge in overall market cap across the sector growing by 0.43% to $79.49 billion.
In February 2021, Elon yet again tweeted his endorsement of cryptocurrency Dogecoin, describing it as “the future currency of Earth” and announced plans to accept it to launch an upcoming satellite named DOGE-1 to the Moon. As expected, his endorsement boosted the cryptocurrency by 55%. He would later in May 2021, after announcing that Tesla had stopped accepting Bitcoin to purchase it vehicles put up a poll on Twitter to ask whether people wanted Tesla to accept Doge. He further went on to claim that they were working with Doge Developments to “improve system transaction efficiency” which he described as potentially promising.
Cognizant to the aforementioned in the analysis above, many people have raised eyebrows as to whether Elon’s regular shift in stance to “use or not to use” cryptocurrency as means of payment is borne out of a genuine concern for all the issues he raises; or a tool to manipulate market value with the propensity of performing the same actions on other markets should his tactics keep working?
The environmental concerns raised by Elon regarding the use of bitcoin as payment is nothing new. There have been several studies conducted which have suggested that cryptocurrencies are energy hungry and consume a lot of electricity, hence generating a lot of greenhouse gases ultimately making them bad for the planet.
However, alternative opinions go with the school of thought that even though his environmental concerns are to be considered, Elon Musk is simply wielding his influence to disrupt the cryptocurrency market with his constant inconsistent tweets on the matter which affect price movement only in the short term. His 12th May 2021 tweet particularly came as a shock to many members of the Twitter community and beyond considering that he is a known advocate for the use of cryptocurrency for payment. This is why his departure from the usual stance has raised eyebrows as to whether he has genuine concerns or just manipulating the situation for undisclosed reasons.
It is hard to believe that he had not known about environmental concerns associated with cryptocurrency prior to Tesla’s huge investment in Bitcoin in February 2021. If he knew this, and still went ahead to endorse the investment, it goes against Tesla’s Mission Statement and so the question remains why did he go ahead, make huge profits, only to back track and attempt to crash the market? It is the same Elon Musk, who in a tweet criticized the US government’s plan to provide stimulus packages in the heat of the COVID-19 pandemic, after his own Tesla reported: “As part of various governmental responses to the pandemic granted to companies globally, we received certain payroll related benefits which helped to reduce the impact of the COVID-19 pandemic on our financial results.” Studies have also shown that Musk’s Tesla and SpaceX relies heavily on tax credits as a sales incentive for buyers, in addition to green tax benefits and subsidies having received nearly $5 billion in government aid over the years . People are wondering, does Elon enjoy biting the hand that feeds him or he’s simply a sell out?
Elon Musk has raised his personal concerns about the use of cryptocurrency, whether for the environment or liquidity which become market trend influence opinions. He has a massive responsibility of communicating firmly on his stance. The latest we have heard of him in his series of tweets is to not outrightly deny that his electric-car company has sold or could soon sell all of its bitcoin (BTC, -5.93%) holdings because of the criticism he has received after suspending the world’s largest cryptocurrency as a form of payment. And yes, Bitcoin’s price dropped immediately after the tweet, to near $45,100 and eventually sank to as low as $44,459.02 before recovering!
*The market values of Bitcoin mentioned in this article are from 12th to 17th May 2021. Since then the market value fluctuations have been impacted by different announcements such as China ban on crypto.