A Musk tweet on the 16th of May 2021 led to a 20% downfall of Bitcoin. The tweet implied that Tesla has sold all of its Bitcoins. The downfall of Bitcoin was halted the next day, soon after Elon Musk tweeted again stating that Tesla had not sold any Bitcoin. A couple of weeks later, Musk tweeted a heart break emoji captioning it “#Bitcoin”; the saga of the downfall of bitcoin had begun again! It didn’t end till Musk made a U-turn on his statements tweeting that Tesla would in fact accept Bitcoin.
But one has to ask, does Elon Musk really control the cryptocurrency market? The answer is both yes and no.
The market price of cryptocurrencies are derived by the basic fundamentals of economics, which is demand and supply. Demand being proportional and supply being inversely proportional to the price of these intangible assets. While some cryptos like Bitcoin have a limited supply, for example 21 million bitcoins, others like Ethereum don’t have an explicit cap on their supply.
Whilst most cryptocurrencies can be manipulated in the short term, bitcoin having a limited supply makes it easier for Elon Musk to control Bitcoin prices in the long term when compared to Ethereum. Most investors believe that most financial markets are semi-strong efficient and that some individuals have more knowledge than that of the general public. Therefore, retail investors lie their trust in Elon Musk because of his billionaire status as well as being the CEO of Tesla, believing that due to those factors he possesses more market information than the market and can control the market sentiments.
On the other hand, many would argue that Elon Musk has no role in the constant change of the price of Bitcoin, and the tweets were posted after institutional or big investors had already started trading bitcoin. This can be proven by looking at the Bitcoin technical chart which was following the Wyckoff Accumulation pattern.
The Wyckoff accumulation pattern has 5 phases where the price fluctuates in a range. The higher bounds of the range are known as resistance while the lower bounds of the range are known as support. In phase A there is intense selling pressure which results to the price going below the support, after which it rebounds to the resistance before testing the support again. Phase B leads to the price falling further than the lows of phase A, before shortly rebounding. Phase C is a crucial phase where for one final time, it tests the support also known as the spring and that is where the rally begins. Phase D and E occur when prices move in a bullish pattern, finally breaking the resistance to move further up.
The Wyckoff accumulation stage looks something like this –
The negative tweets by Elon Musk for Bitcoin came during phase A and B while the positive ones came during phase C and D which many people believe is purely co-incidental.
The bitcoin pattern showed below between May 2021 to June 2021 followed the Wyckoff Accumulation stage. Between May 2021 and June 2021 Elon Musk tweeted about cryptocurrency 12 times.
There are many people who have termed Elon Musk as a “Doge God” and believe he played an instrumental role in the high volatile prices of Bitcoin while individual and institutional technical analysts believed Musk’s tweets just came at the right time and the changes in prices were due to the Wyckoff accumulation stage. Does Musk control the cryptocurrency market? Will Bitcoin, Ethereum or Doge Coin continue its bullish run? The future will surely tell.