The Elon Effect: Musk’s influence is waning over crypto
Elon Musk is losing his strongman-like influence over the price of cryptocurrencies, it would appear, and this is a good thing for the likes of Bitcoin and Ethereum.
Bitcoin lost 0.5% overnight on Wednesday on news Tesla, the electric vehicle maker of which Musk is CEO, had liquidated the majority of its holdings of the world’s largest cryptocurrency.
It fell to $23,268 following the announcement, yet subsequently rallied and was up 1.41% at $23,578.75.
Tesla purchased $1.5 billion of Bitcoin over a year ago.
Musk said the main reason for the sell-off was uncertainty regarding China, whose economy has been impacted by strict Covid lockdowns.
The world’s richest man commented during the firm’s earnings call: “We are certainly open to increasing our Bitcoin holdings in future, so this should not be taken as some verdict on Bitcoin. It’s just that we were concerned about overall liquidity for the company.”
As the comments did not directly criticise the world’s largest cryptocurrency, the losses were curbed for sure.
But that said, a few months ago even a slight nod towards a certain digital asset – let alone a 75% sell-off of his company’s holdings – by Musk on social media would have affected prices across the market.
Late last year, he tweeted “You can now buy a Tesla with Bitcoin”. One of the largest companies in the world accepting BTC as payment helped push the asset to new highs. It reached nearly $65,000 within a month of the tweet.
Similarly, Musk announced Tesla would trial run accepting DOGE for merchandise and the price subsequently jumped 43% over the next two hours.
However, The Elon Effect on prices is diminishing, as the market’s indifference on Wednesday highlights.
To my mind, this is a good thing. It indicates a maturing market that can’t be so easily influenced by a celebrity business owner. It shows how retail, and critically institutional, investors increasingly understand and appreciate the inherent current and future value of digital, borderless, global currencies – they don’t need Musk’s steerage.
Indeed, without heat and hype affecting prices, we can see the real value of assets laid bare, and as such we can expect further significant waves of institutional investment into crypto.
Therefore, as The Elon Effect loses its grip, we expect a less high-octane, steadier, continued upward trajectory for Bitcoin over the next few months