Pump and dump just for the heck of it?
By Wolf Richter for WOLF STREET.
Why can’t this dude just shut up? That’s what people, including the SEC, want to know. But look, he just can’t. Apparently, no one can take his Twitter account away from Elon Musk, and Tesla isn’t putting it under adult supervision, as the SEC has suggested. So he was at it again today, responding to accusations by Magda Wierzycka, CEO of South African tech and financial services firm Sygnia, that he’d pumped up the price of Bitcoin by tweeting all manner of things, and then “sold a big part of his exposure at the peak.”
So yes. Musk acknowledged in his tweet today that Tesla had in fact dumped part of its holdings of Bitcoin, but he argued that it wasn’t a big part, that it had “only sold ~10%” of its Bitcoin holdings.
And he came up with a rationalization why Tesla had dumped 10% of its Bitcoin holdings: “to confirm BTC could be liquidated easily without moving market.”
That was a joke apparently. Over the past two months, the price of Bitcoin plunged from about $64,800 to around $33,000 at the low and now hovers at $39,000, after the current Musk-induced spike, with the plunge leaving a big-fat question market over his assertion that Bitcoin could be “liquidated easily without moving market.”
But Musk walks on water, and he can assert anything, no problem.
The second part of Musk’s tweet contained an effort to pump up the price of BTC by walking back his assertion in May that Tesla would no longer allow customers to pay for vehicles with Bitcoin because of the carbon footprint of Bitcoin mining, which was another one of his Bitcoin 180s. At the time, that statement had whacked the price of Bitcoin.
Bitcoin mining is of course the fiat-currency equivalent of “money printing.” But money printing has a tiny carbon footprint, because it needs just enough electricity to move credits by computer and the internet. You don’t need huge arrays of special mining rigs with special power supply and cooling equipment to print money.
So today he tried to walk back his carbon-foot print concern, by tweeting: “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”
OK, we’re not going there. We’re not even getting into what this means, and how many years, if ever, it would take to get there. But it did pump up BTC instantly from around $35,000 to about $39,000. Musk speaks, BTC moves.
Folks apparently cherry-picked this second statement from his tweet, not the first one, to fire up the price of BTC.
“What we have seen with Bitcoin is price manipulation by one very powerful and influential individual,” said Wierzycka in the interview.
She doesn’t object when he manipulates up the price. The issue is when he manipulated down the price, which is apparently one of the seven deadly sins.
Musk was the Bitcoin hype community’s hero until he started going astray. Then he was vilified. You gotta give this dude some credit: He knows how to piss people off.
But it takes two to tango.
Musk is just mouthing off. He’s doing what millions of other folks are doing. But no one pays attention to them. I can say whatever I want to about Bitcoin, and it won’t move the market.
Musk – with Tesla able to put its billions of dollars to work that it raised from investors last year – is different. Folks cling to every one of his words. They have been for years with Tesla, all his now forgotten promises that made TSLA jump. Folks buy and sell based on what he says.
He moves markets because markets want to be moved by him. These folks are looking for a voice that would unite them for a brief moment which would allow them to trade all in one direction, and the now unified mass would drive BTC or TSLA or whatever further into the sky. That’s what everyone wants.
These folks want him to speak, and they are lapping up every syllable he says as long as it unites them. Most of the time, his words move prices up, not down.
And that was the tragedy in his Bitcoin escapades when his words – and actions, namely dumping 10% of Tesla’s Bitcoin holdings – helped pull the rug out from under Bitcoin.
If every market player just ignored what Musk says, none of his promises and assertions would be a problem. Pump-and-dump is not a problem when no one pays attention to you.
But these folks handed Musk a huge megaphone that everyone is eager to hear because prices jump when he speaks. But when he fails to do his duty in manipulating up the price, when he lapses and says something untoward that causes prices to plunge, these folks get really upset. Well, the solution is simple: stop paying attention to what Musk says. But markets are always looking for a messiah, and in Musk they had their guy, until suddenly they didn’t.
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