It was enough for one of the richest men in the world to put #bitcoin in his bio on Twitter to start the world’s next bitcoin frenzy. But first, Elon Musk didn’t reveal his big plans for Bitcoin, even though he was a supporter of blockchain technology in his numerous interviews.
Then, prior to the big news about one of his companies Tesla buying bitcoin, he just put this hashtag on social media. The result? In just a few minutes bitcoin surged a few thousand dollars up. But it was just the beginning.
Elon Musk skyrocketing bitcoin
It appears that Mr. Musk is not only good at sending the actual rockets to space but also made for the first cryptocurrency to break new records. On Monday, February 8, SEC revealed the latest financial report by Tesla Inc stating that they have bought $1.5 billion worth of bitcoins. The report also showed the plans of the company for the nearest future - to accept payments for their electric cars in Bitcoins.
At the time of writing this article, a new Tesla Model 3 (the cheapest one) coming at around $39,000 would cost 0.8 bitcoins, as suggested by Yahoo Finance.
After dropping to $30,417 on January 27, the bitcoin shot up to $38.871 on Sunday, February 7. After the news about Tesla purchasing $1.5 billion worth of bitcoins, the price of cryptocurrency reached its new all-time high of $48,042 on Tuesday, February 9th. That would be about a 20% rise in just a few days. Bitcoin to pound chart displays a likewise trend.
Starting 2020 at the rate of $7,000, bitcoin jumped over 300% by the end of the year. One of the reasons for its rapid ascent is considered to be the fact that large public companies began buying this cryptocurrency in large amounts. Before Tesla, international businesses like PayPal, Square, BlackRock Inc transferred part of their assets to crypto. As Elon Musk tweeted afterward, ‘in retrospect, it was inevitable’. Let’s also not forget that the economic plan of president Joe Biden suggests increasing taxes for ‘the wealthy’ (businesses earning $400,000 a year and more), including capital gains tax, social security tax, additional tax on book income, corporate income tax, and top marginal income tax. The response of big businesses was to secure their capital by transferring it to crypto (while also making it more liquid).
The Elon Musk effect
The so-called Elon Musk effect has already been a talk of the town for a while, especially among the Twitter community. The billionaire is consistently active on this particular microblogging platform. The thing is, any comment that he makes immediately starts a new wave in financial markets.
It is true that Elon Musk, with his 43.7 million subscribers is being closely watched by investors of all kinds. After he hashtagged #bitcoin in his bio, Coinbase experienced a 100,000 influx of new users. And he wasn’t alone - soon after that a few public persons did the same thing with #bitcoin signature in their Twitter accounts. Namely, a multi-millionaire investor Anthony Scaramucci and the Reddit founder Alexis Ohanian.
And it gets better. The next day, a few top crypto exchanges had to temporarily shut down their operation because they have simply run out of bitcoins to sell. For the first time in history, the total value of bitcoin in circulation has reached half a trillion US dollars equivalent. The financial experts concluded that by that, the bitcoin network has become the largest financial service in the world, overlapping services like Visa.
Musk supporting financial democracy
If furthering our vision beyond bitcoin to USD chart, we can trace that Elon Musk effect stretches much further. The billionaire also had a call of righteousness when trying to protect the idea of anti-monopoly and democracy in the financial markets.
It all started when users of the Reddit trading discussion group Wallstreetbets found that hedge funds have been purposefully shorting certain stocks for a long period of time. It led to the shares of GameStop Corp go down 140%. Then, with the help of Elon Musk, the users of this community decided to pump the shares of GameStop by massively buying them. Musk just tweeted “Gamestonks” and placed the link to the Wallstreetbets community. He also referred to shorting as a scam. It was without name-calling but everyone understood the essence. Boom. It was enough. The GameStop shares soared 50% up. As a result, hedge funds suffered considerable losses.
The only problem? These hedge funds were the main investors of the renowned exchange app Robin Hood which the community of traders used in their attempt of democratizing the market. So Robin Hood selectively banned buying stocks of certain companies. One of such companies was GameStop Corp (GME). And they even got further. Later, it was reported that Robin Hood has been selling (shorting) their users’ stocks without their permission. Taking away from the poor and giving it to the wealthy? The Robin Hood seems to have gone astray. Anyway, now the exchange is facing a number of lawsuits.
Meanwhile, monopoly is an unspoken problem that has been around in financial markets for some time now. The Telegraph reports that nearly 100 accounts own 13% of all the bitcoins in the world. At the same time, 40% of all the bitcoins belong to roughly 2,500 accounts out of 100 million. And while small investors still believe in the philosophy of Satoshi, the market is not as free and decentralized as it seems. Luckily, the world’s greatest influencers like Elon Musk are helping the voices of common people to be heard across the digital media.