Technology

Will Musk influence the price of cryptocurrencies more? – BeinCrypto France

While we were expecting a bearish move after Tesla revealed it had sold 75% of its Bitcoin position, the number one cryptocurrency market surprised everyone by holding the $22,000 line. At the same time, Elon Musk’s statement about his holdings in Dogecoin did not move the price of the meme token too much. The billionaire will no longer have influence in the crypto market?

Elon Musk: The number one influencer in the cryptocurrency market in 2021, way more than Jerome Powell and Christine Large, who are respectively Fed President and ECB President. He even coined the phrase “Mask Effect”, French for “Mask Effect”.

The history of the influence of the founder of Tesla on cryptocurrencies began in early 2021. On January 29 of the same year, when the entrepreneur changed his Twitter bio to #bitcoin, the price of the cryptocurrency reached $6,000 in a matter of hours. A similar move came in February after he announced that Tesla was going to buy the equivalent of $1.5 billion worth of bitcoin.

Dogecoin, the big winner

However, the cryptocurrency that really benefited from the “Mask effect” is called Dogecoin. Moreover, the billionaire was even called the Father Doge. Thus, Musk’s tweets allowed Dogecoin to take over 1000% in the first half of 2021.

According to a study by Lennart Ante based on a sample of 47 cryptocurrency-related Twitter events, Dogecoin is the only cryptocurrency that has benefited from Musk’s tweets over time. Summing up his research, he wrote:

“We found that, on average, price effects are significant only for Dogecoin-related tweets, but not for Bitcoin. This is because for the latter, the significant price effects of positive and negative news cancel each other out, as further classification and analysis of bitcoin-related tweets showed.”

In fact, you get the idea: The “Mask Effect” is not only a movement of influence that has a positive effect on prices, it can also vary in the other direction. In May, when Tesla announced that it was no longer accepting payments in BTC due to weather conditions, in addition to the crash in China, it sent cryptocurrencies into a bear market.

The Musk Effect: Influence that fell with a bear market

Having been the undisputed star of the cryptocurrency market during the first half of the year, Elon Musk began to lose his influence in the context of the bear market. His tweets in support of Dogecoin no longer have such an explosive effect.

Since his ATH at $0.72, Musk’s favorite DOGE continued to fall for the rest of the year. Even as the market recovered from the fall from August to October, Dogecoin failed to recover. It has even been supplanted by the Shiba Inu as the number one token meme.

We noticed that every time Elon Musk tried to revive the price with a tweet, another meme token took advantage of it. For example, his tweet “Baby Doge, doo, doo, doo, doo, doo. allowed Baby Doge to take 35% after the announcement. However, the price of Dogecoin (DOGE) rose only 8%.

With the intensification of the bear market in 2022, the Musk effect has become zero, if it does not affect the price of cryptocurrencies too much. We saw small breakthroughs from Doge when the CEO announced his desire to buy Twitter. But this is not at all what happened before after Musk’s statement.

Therefore, it is no coincidence that the news of Tesla’s sale of $930 million in bitcoin reserves did not have a downward effect on the value of the cryptocurrency. Similarly, the price of the Doge hasn’t changed much since his hold announcement.

Is it good for cryptocurrencies?

In terms of adoption, Musk’s tweets from his 80 million followers could have some resonance to bring many more people into the cryptosphere. However, opinions are divided on the benefits of billionaire posts for digital assets.

Opponents of the Musk effect argue that the Tesla founder’s posts don’t necessarily illuminate the fundamentals of the industry. According to opponents of the “Mask effect”, the advertising of the CEO only emphasizes the gambling nature of the industry. That’s why people only look at prices after he makes a post about cryptocurrencies.

Supporters of the billionaire point out that financial markets are also moving after the statements of Jerome Powell and Christine Lagarde. However, the problem with Musk is that he is both an investor and an influencer in the cryptocurrency market. Therefore, there is a real concern about conflicts of interest.

Thus, the fact that digital assets are starting to reduce their dependence on Musk is a sign that may indicate maturation.

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