Twitter went berserk in May with hate mails targeted towards Tesla’s founder Elon Musk after he pretty much guillotined Bitcoin out of his sheets. As crazy and emotional outrage as it was over Musk’s change of heart for the world’s first cryptocurrency, the reaction from his amassed fan base was justified. From being one of the most public and popular supporters for Bitcoin, with his tweet, Elon became the catalyst for the dump that slashed BTC’s value in half. Not to mention, investors around the world, including the ones in his so-called fanbase, lost heavy sums of money as the market plummeted.
But believe it or not, Elon Musk is highly overrated when it comes to his “influence” over the crypto market, especially bitcoin. Let’s see what actually happened.
Musk’s Tweet Was Just a Catalyst
Yes, it’s completely true that the past is etched with a trail of market fluctuations aligned with Musk’s tweets. In the complete light of events, all of Elon Musk’s comments and tweets before he decided to press pause on his plans to accept bitcoin as payments in exchange for cars were positive.
What generally happens is that his massive following takes his vague opinions as a credibility check for the asset, resulting in a flood of green candles and price surges. And that over time gained him the reputation in the market as the “Musk Effect.” However, Elon’s tweet that came on May 12th was just a mere catalyst or a camouflaged push that covered the natural phenomenon in the stock cycle – Accumulation, Markup, Distribution, Markdown.
Weeks before Musk’s tweet, BTC had already taken a sharp turn from its high of $63,503 on April 13th to a quick fall to $49,004 on April 25th, after which the asset gained a little momentum to $58,803 on May 8th and then continued back on the downtrend as distribution continued.
As the above image depicts, the first massive dip came way before Musk’s tweet, and even by that time, Bitcoin was already on its way to the second dip. Musk’s tweet acted as a push as much as a catalyst that set the asset back to its natural course after BTC marked up and hinted towards being overbought and tends to go under correction. Generally, assets tend to naturally follow the downtrend in any normal stock cycle as sellers try to accumulate high profits.
It is undeniable that the crypto space is still nascent and evolving in its own terms, and Bitcoin is yet to establish its permanent stance as an asset class. The consistency in fluctuations powering massive rallies and falls in the price cycle leaves the retail investors confused. Thus, they are prone to fall under the effects of FOMO and fear, as indicated in the 2017 market dump.
However, the educated players in the market including institutional investors believe in what the assets stand for and take the patterns in the price cycle into consideration as they buy and sell to benefit their gains.
As of now, the market is highly impressionable, causing investors to act on a fear-struck impulse fuelled by someone else’s opinion and judgments. But as crypto regulations and adoption strengthen around the globe, awareness around the potential of crypto-assets and projects will also grow. And inevitably, Bitcoin will gain steady recognition in the market as mining operations dig deeper into sustainable energy alternatives, bricking up the market guarded against the influence of market manipulations.