Crypto Hazard: The Elon Musk Effect Has Come to an End

Key Insights:

• Elon Musk, advocate or market manipulator, sliced Tesla’s BTC holdings in Q2.
• Dogecoin didn’t suffer a similar fate but could do so should DOGE fall below Musk’s January 29, 2021, purchase price.
• Crypto investors spurred by Musk’s tweets may need to tread with care. Musk’s support could become a vapor trail at any time.

Elon Musk, the CEO of Tesla Inc. (TSLA) and SpaceX, has been a long-time advocate of Bitcoin (BTC) and meme coins, Dogecoin (DOGE) and Shiba Inu Coin (SHIB).

Crypto references have frequently appeared on the Musk Twitter account, with both Tesla and SpaceX pawns in the price movements of BTC, DOGE, and SHIB, in particular.

Ultimately, supportive tweets, Tesla and SpaceX company announcements, and interviews have raised eyebrows and questioned whether the Musk commentary is akin to market manipulation.

More significantly, the most recent company news suggests a shift in sentiment towards cryptos or perhaps, a show of force over the crypto market.

Tesla Inc. Dumps Bitcoin Holdings without Warning

On Wednesday, news hit the wires of Tesla offloading 75% of its crypto holdings. According to Reuters,

“Elon Musk cited concerns about his company’s overall liquidity as the reason for the sale.”

In total, Tesla sold $936 million equivalent of BTC in Q2, one year after purchasing $1.5 billion at close to the top of the market.

Elaborating on the concerns over liquidity, Elon Musk stated,

“It was important for us to maximize our cash position. We are certainly open to increasing our bitcoin holdings in the future, so this should not be taken as some verdict on bitcoin. It’s just that we are concerned about overall liquidity for the company.”

However, musk did confirm that the company did not offload its Dogecoin (DOGE) holdings.

On February 8, 2021, news hit the wires of Tesla’s $1.5 billion bitcoin purchase. However, unlike other long-term BTC hodlers, also known as Bitcoin Whales, Tesla flooded the market with a sizeable portion of the 2021 investment, contributing to the BTC and broader crypto market pullback.

While Musk highlighted that DOGE did not suffer the same fate, DOGE and SHIB now face similar prospects. Neither DOGE nor SHIB have demonstrated price stability to justify special treatment.

The Musk Effect was evident, with the crypto market reacting to the news.

Bitcoin slid by 5.45% from a day high of $24,276 before finding support to end the day with a 0.76% loss. By contrast, DOGE responded favorably, rising by 1.59% to buck the broader market trend on the day.

The references to holding DOGE could be considered price manipulation. In June 2022, Musk spoke to Bloomberg TV, citing his support for DOGE. Musk delivered support in response to DOGE investor calls for Musk to reiterate his support for the meme coins.

During the interview, Musk also said that BTC amounts held were insignificant relative to the cash assets, in reference to Tesla and SpaceX.

More significantly, Musk delivered his support despite an investor filing a $258 billion lawsuit against Musk, SpaceX, and Tesla Inc. for claiming that “Dogecoin is a legitimate investment when it has no value at all.”

Elon Musk and the Big Flops that Preceded Tesla and SpaceX

After an uncertain beginning, Tesla Inc. has established itself as a profitable car manufacturer, with sales revenues of more than $18 billion. While SpaceX is on a firmer footing, Musk has had a chequered past. A string of failings takes the shine off the cv.

Some well-known Musk moments to forget include an unsuccessful job application at Netscape, the removal as CEO of Zip2, removal from PayPal, and a string of failed rocket launches.

For investors looking to ride on the Musk coattails, the decision to offload 75% of Tesla’s BTC holdings is a warning to DOGE and SHIB holders.

In June, Elon Musk said that the BTC holdings were negligible relative to cash assets. Dogecoin could suffer a similar fate should Musk offload the DOGE holdings. Musk could even suspend DOGE payments for merchandise at SpaceX and Tesla.

Dogecoin had its big moment on January 29, 2021, when DOGE rallied by 166% on news of Elon Musk purchasing DOGE. Musk provided no details on his DOGE purchase. Despite this, DOGE surged to an August 5, 2021, all-time high of 0.7398 before tumbling to a June 18, 2022, current year low of $0.0491.

Buyers jumping in at around August 2021 levels will be disgruntled, despite Musk’s efforts to deliver DOGE rebounds on several occasions. Viewing the DOGE daily price chart, Musk’s price spikes are evident. However, these have not reversed the downward trend since August 2021.

Elon Musk made one comment in his June interview with Bloomberg TV that should resonate among crypto investors.

“I have never said that people should invest in crypto.”