Washington: First he loved them, then he doubted it, but does he manipulate them? Tweets from Tesla boss Elon Musk about cryptocurrencies like bitcoin annoy their followers and raise eyebrows in market watchers.
The saga began in February when Musk’s company Tesla announced it would buy $ 1.5 billion in bitcoin and later said it would accept virtual currency as payment for its electric cars.
But in mid-May, he broke hearts with tweets questioning the digital asset, especially its vast consumption of electricity produced from polluting substances like coal.
This sent bitcoin into a downward spiral, sending it plunging to $ 30,000, from almost double what it was 10 days earlier. He then regained his strength, climbing to around $ 37,000 on Friday.
âThe fact that more people aren’t outraged by #ElonMusk for deliberately crushing cryptos is amazing. Stop worshiping it, âone Twitter user said.
The post, typical of the backlash the flamboyant executive caused, included a hashtag combining an unprintable insult with his last name – and another Musk detractor went so far as to launch a cryptocurrency using the hashtag.
Musk, who is the most vocal on Twitter, continues to support dogecoin, another virtual currency that was created as a joke but has grown in popularity.
However, his tweets and their influence on prices are increasingly gaining the attention of analysts.
âYou have to prove that his tweets really moved the market and it certainly seems to be. This raises a host of issues, âTodd Cipperman of Cipperman Compliance Services told AFP.
“How much is that Doge in the window?”
Days after his online missives caused trouble for Bitcoin, Musk on Thursday blew up the value of dogecoin by tweeting “How much is this Doge in the Window?”
âI lost everything because of your encrypted tweets and today I live under a bridge,â the Twitter user replied. “I hope you are proud.”
Kristin Boggiano, president of digital asset investment firm CrossTower, said the issues facing the cryptocurrency are bigger than just tweets from an electric car executive.
But she said “there is clearly a conflict of interest” regarding Musk’s role in the market.
âHe has advised on dogecoin, and clearly has an interest in dogecoin and he is commenting on bitcoin,â she said.
Yet while Musk âcan influence retail, I don’t think he has the capacity to influence institutional clients,â she said.
The risk for bitcoin, the most popular digital asset, comes from overseas, Boggiano said.
This week, around $ 8.5 billion worth of bitcoin was liquidated in 24 hours on Wednesday after several Chinese banking federations warned against speculation in cryptocurrencies.
âMuch of bitcoin’s volatility comes from offshore,â Boggiano said, adding that for Chinese business leaders, digital assets âare not supported by real value.â
Cipperman described the regulatory climate in the United States as âthe Wild Westâ.
The US Securities and Exchange Commission (SEC), the country’s stock market regulator, has so far ignored the crypto turmoil, and Cipperman calls it “a mistake.”
âThe crypto market would benefit significantly if it were more regulated,â he said. “It would reassure people a lot that this is not a dangerous manipulation, it is a financial asset like any other.”
Interest of the CTFC
It remains to be seen whether the SEC or the Commodity Futures Trading Commission (CFTC), which oversees derivatives, will play a more active role in regulating digital currency.
The Internal Revenue Service’s tax administration has started requiring taxpayers to report their holdings in these assets, and the government of President Joe Biden has proposed expanding tax reporting for digital asset transfers between businesses.
Another bill in Congress would ask the SEC and CFTC to form a group with industry professionals to review the regulation of the sector.
Meanwhile, the Federal Reserve said this week that it was exploring its options for digital payments and even issuing an official virtual currency, backed by the central bank.
Aaron Klein, a financial technology expert at the Brookings Institution, warned that “this is no longer the place for the government to regulate the value of bitcoin that it should regulate the value of an Amazon stock or the price of it. ‘gold.”
Instead, “the goal is to make the market transparent and honest and to protect investors, not to focus on the price of the asset.”