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Musk’s tweets have an effect on the whole cryptocurrency sector. He believes it’s just a joke, but the joke isn’t as funny as it used to be.
What a strange week in cryptoland. But isn’t that so every week?
Elon Musk provided a textbook definition of “buy the rumour, sell the news.” last Saturday. In the days leading up to his “Saturday Night Live” hosting debut, he helped take Dogecoin, his beloved meme token, on a rocket ride on Twitter—until the ride suddenly ended minutes before SNL began. By the time Musk’s mother, Maye Musk, mentioned DOGE in the opening monologue, the coin had plummeted from 62 cents to below 50 cents in less than an hour. Later in the episode, Musk, as financial analyst “Lloyd Ostertag,” confessed to Michael Che that Dogecoin is a “hustle”—not a good look, even in a comedy sketch.
As the week began, Musk was the biggest story in crypto, as critics once again asked: Were his DOGE-pumping tweets irresponsible? What does Musk owe to all the Tesla worshipers who bought Dogecoin because of his tweets? (The tweets are not illegal, though they are arguably unethical; in late February, in response to reports that the SEC was investigating his Dogecoin tweets, Musk said, “I hope they do! It would be awesome.”)
On Wednesday evening, Musk dropped another bombshell: Tesla, just three months after purchasing $1.5 billion in Bitcoin, will abandon the blockchain due to environmental issues.
What’s the deal? “The nature of Bitcoin mining has not changed in the last three months.” wrote Wedbush analyst Dan Ives. Ives described Musk’s Bitcoin reversal as “surprising and confusing.” Musk, according to Decrypt’s Scott Chipolina, “has dealt a potentially fatal blow to his image as one of Bitcoin’s biggest advocates.” Musk’s tweet sent Bitcoin down 15%, and other big coins suffered as well.
Musk was singing a new song as early as April 22. He responded with “True” to a Jack Dorsey tweet arguing that Bitcoin “incentivizes renewable energy.” Everything evidently changed—the most likely explanation is that Musk was informed that Bitcoin’s environmental effect is harming Tesla’s green picture.
So, in a week that included reports of a US Department of Justice and IRS probe into Binance, as well as an eye-popping US inflation reading that sparked concerns about whether Bitcoin really is a buffer against inflation, Musk’s tweets drowned it all out. Elon Musk was once again the best headline in cryptocurrency.
Will MicroStrategy CEO Michael Saylor’s tweet regarding Bitcoin’s environmental challenges have sparked the same degree of concern? What about Square CEO Jack Dorsey’s? No, I don’t believe so.
Musk is the most visible proponent of crypto flag-waving in modern technology. Prices fluctuate based on his tweets. When Musk and Tesla first invested, Bitcoin skyrocketed; it’s no wonder that Musk and Tesla withdrawing will have the opposite impact.
Of course, one erratic tech billionaire cannot guarantee the long-term survival of a trillion-dollar global payments network that has been in operation for 11 years. Elon Musk is dwarfed by Bitcoin. So what exactly is Dogecoin?
Musk said on Thursday that he is “Working with Doge devs to improve system transaction efficiency.” (It turns out that there are Dogecoin developers; Decrypt’s Adriana Hamacher finds those who disclosed Musk has been communicating with them since 2019.) The post, along with the announcement that DOGE would be listed on Coinbase shortly, came as a gift to DOGE investors, sending the coin up 30 percent in a matter of minutes.
During a Clubhouse chat in February, Musk warned that his tweets about Dogecoin are intended to be jokes. When I asked Mark Cuban about Musk’s Dogecoin tweets in March, he said, “Isn’t that just Elon? He enjoys stirring up trouble, and he has the means to do so.” On May 6, Bloomberg’s Matt Levine posted, “Dogecoin is up because it’s funny.”
The price effect of Musk’s tweets, on the other hand, is no laughing matter. And now he seems to be promoting Dogecoin rather than Bitcoin. Not to mention that he is also the CEO of SpaceX, which will launch a moon mission next year that will be paying for in DOGE. And just this week, he asked his Twitter followers if Tesla could consider Dogecoin; think how that would affect the DOGE price.
Bitcoin adherents no longer find the joke amusing.