Thus, there is no reason to be able to deny his big influence. His tweets are making stocks roll. As he updated his Twitter bio to #bitcoin in late January, just after a short period of time, the Bitcoin’s price popped almost 20 percent.
Musk has even posted about Dogecoin on his tweet but just said in a Clubhouse conversation that his cryptocurrency-related tweets are nothing serious but “jokes”. No matter what those tweets mean, people feel something and behave whenever Musk tweets.
What is Musk ‘s influence on Bitcoin and Dogecoin prices?
Quantifying the Musk Cryptocurrency Impact
To test the Musk influence, Lennart Ante of the Blockchain Research Lab in Germany started out his study. He listed six latest Musk tweets that related to cryptocurrencies, two referencing Bitcoin and four discussing Dogecoin, or “events” such as updating Twitter profile.
Within before and after any tweet (or event) Musk posted relating to Bitcoin or Dogecoin, Ante then plotted the associated minute-by-minute close values, trading rate, and the number of trades from the cryptocurrency exchange Binance.
Event #1: Update of Twitter Bio to #bitcoin
There is a shift of Bitcoin’s price from about $32,000 to almost $38,000 within nearly one hour when Elon Musk changed his Twitter bio to #bitcoin on January 29, 2021. Over the next period, it fell to around $36,000, presumably due to certain profit-taking, and again rose up to $38,000 within next hours.
Bitcoin trading was under the number of 5,000 trades per hour on average in the hours leading up to Musk’s bio move. Trading soared to more than 20,000 trades in the 60 minutes after the bio update until dropping back down closer to its usual trading volume.
Event #2: A photo of Dogecoin posted
In comparison, it could be said that the Dogecoin photo in Musk’s posting on January 28 had a less immediate effect on that cryptocurrency than his Twitter bio altered, yet this impact was still important.
Approximately four hours after the tweet, Dogecoin’s price had increased four-times until dropping damn near 50% of the new high in the two hours that followed. Musk’s Dogecoin tweet enabled create a short-term surge of trade around five hours following the tweet, close to the prior day’s Twitter activity.
Event #4: A single word: Dogecoin
One of the important influences of his Twitter behavior was Musk’s December 20, 2020 tweet and the update of his Twitter bio. Ante said that the average DOGE/USDT trading rate was around $1,942 per minute within that 30 minutes before the event, with an average of 9 trades per minute. The average trading volume per minute was around $299,330 for the 30 minutes following the post, with 775 trades per minute.
Event #5: Musk tweeted “Bitcoin is my safe word”
Not all the Bitcoin and crypto tweets from Musk have a good effect on rate increases. In another post saying “Bitcoin is my safe word” on December 20, 2020 and the value of Bitcoin is just as bs as fiat money, which was accompanied by an approximately 1.7 percent decrease in Bitcoin price, with little observable shift in trading volume.
What Should Investors Do with their Bitcoin on Musk’s Tweets?
Four of the Twitter behaviors are presumably just correlations to prior market developments and contribute to few or no significant price responses in his report, Ante concluded. Nevertheless, the other ones seem not to be responses but separate actions that lead to enormous changes in trade rates and substantial and important irregular positive returns.
For investors who want to learn from Musk’s messages on Twitter, they should analyze before starting a business.
- Pre-tweet trading practice. In the hours of the Musk tweet or case, was there uncertainty in trading? So then, Ante’s study indicates that if the market activity was less erratic, the effect of a Musk tweet would not be as high as it would be.
- Time matter. The study of Ante indicates that to actually show the influence of a tweet from Musk requires a matter of time. There is a possibility for people to get involved in the trading turmoil of just an Elon Musk tweet.
After all, it could be concluded that the situation is two-direction interaction. Particularly, if a single tweet could theoretically contribute to a rise of $111 billion in the market capitalization of Bitcoin, as Ante describes, some separate tweet totally enables to wash out such similar proportion. If you are starting a business, you have to find a financial investment advisor, so that you can make a good decision base on your personal finance.
Some speculators are anxious because of the move of Elon Musk’s tweets
The adjustment of the richest man in the world in his Twitter bio into #bitcoin is the reason for a 20% increase in value to $38,566 of Bitcoin on Friday. This move led many people to speculate that he spent more money on Bitcoin. At this time, Elon Musk appeared to prompt shares in CD Projekt less than a day ago. His tweet is about the intention to launch a new Tesla’s Model S Plaid car allowing passengers to entertain themselves by playing a game. Consequently, the shares of the Cyberpunk 2077 computer game increase more than 12%.
After that, Musk shared that we would have a relaxed game with Cyberpunk even with hotfixes.
Moreover, with the tweets “Gamestonk!!” (shares of Gamestop) and a link to WallStreetBets Reddit, Elon Musk made the stock of GameStop spike on Tuesday.
In the interview with CNBC, Dan Lane, an investigator of Freetrade said that the ability to manipulate the stock market of Musk was going against his thought of short selling. The analyst also expressed his thirst for analyzing the legality of this issue for the last time.
With a single Elon Musk’s tweet, GameStop’s stock value spiked over $ 10 billion after trading hours. However, many people are facing the potential of losing money in case of dropping in the value of GameStop’s stock.
Rich Pleeth, who used to work for Google and is now an investor in London, said to CNBC that the CEO of SpaceX could “enrich himself with one tweet.” He also expressed that no matter how innovative he was, Musk still had to obey the law.
In contrast, Max Levy of Nutmeg said this problem occurs a lot in the capital markets. Warren Buffett and Ray Dalio are considered to be the major influencers on property prices.
Following “Gamestonk!!”, just a few hours later, Musk tweeted “I kinda love Etsy” making shares of the online craft marketplace up 9%.
With this issue, some of the offices rejected to comment on Musk’s ability to manipulating the stock market by Twitter, including the Securities and Exchange Commission, the New York Stock Exchange. Besides, Nasdaq, a tech-focused stock exchange, and Musk’s representatives did not immediately respond to CNBC’s comment on the matter.
In August 2018, Musk had trouble with the SEC about his tweets about Tesla shares. He said that he wanted to buy Tesla back for $ 420 a share and that he had enough ability to do so. With this incident, Musk and Tesla each have to pay $ 20,000 in fines and Musk must disclose the financial situation of Tesla. Last year, Musk tweeted that the price of Tesla’s stock was “too high”, which led to a decreasing of more than 10% right then. It was the most notorious tweet of Musk even though Tesla’s stock had regained within a week.
Despite the huge impacts of Musk’s tweets this week, at this time, stocks and bitcoin have been shifted for a while. In recent times, Signal has been the app that Musk recommended for his followers. This is an app of a nonprofit promoting the user to utilize encrypted messaging.
With his status, many investors bought a lot of Signal’s shares. However, there were a few investors who mistakenly bought shares in Signal Advance, a small component maker. This caused stocks of Signal Advance to increase by 1,100%.
About new regulation, Dan Lane argued it needed to be updated, be highly applicable, and be clear. It also needed to be brief. He also talked about the difficult situation for the regulators. The SEC could update the new rules in case of the araising of public platforms belonging to the new brands. The challenge of the regulators is the public platforms of these managers which are not limited by the meeting room.
In the sharing with CNBC, Hussein Kanji, a venture capital investor in London expressed his confidence in the SEC’s ability to solve the problems that raising, and to keep the market fair and stable.
Kanji said that it was odd when Elon Musk had huge impacts on the market. He added that he wouldn’t be surprised when Elon Musk started to invest in the consumer product.
In the talk with CNBC, Steven Bartlett, playing the role of the founder of social media agency The Social Chain and a tech investor, shared his opinions about the appearance of influencers in the public market that was similar to fitness and beauty aspects. Additionally, he claimed that Musk was that influencer of the market, and the SEC can’t change that fact.