- Is Elon Musk using his social influence to leverage a pump and dump scheme on cryptocurrencies?
High Volatility in the Market
Earlier this year, Elon Musk revealed that Tesla would accept Bitcoin as a form of payment, only to recant that same statement a few months later in May due to the Cryptocurrency’s “rapidly increasing use of fossil fuels… for mining and transactions.”
Musk’s initial statement and Tesla’s purchase of $1.5 billion in Bitcoin in February gave the currency a viable legitimacy while boosting its token price by roughly 17%. To the same effect, his recent retraction brought the coin’s value down 10%.
This is not the first time Musk has exercised his social influence powers in the Crypto world. Recently, he’s revived Dogecoin after a 50% decline, simply by spewing out tweets from his Twitter throne.
What is Pump & Dump?
“Pump and dump” is a scheme used by investors to maximize their own profits. An investor boosts a stock’s price by spreading false or misleading information. Then, after increasing the price of a stock, the investor sells his existing shares, giving himself a maximum profit; this simultaneously causes the stock price to drop and new investors to lose their money.
Many are considering Musk’s ability to control the tides of the Crypto market as creating a new generation of pump and dump scheming. In the past, pump and dumps were mostly pulled off by making cold calls to swing investors. Now, in the internet age, these schemes are facilitated through social media and surround cryptocurrencies as opposed to traditional (small-cap) stocks.
Cryptocurrency is being targeted harder nowadays due the unregulated market as well as the cheap prices of some of the newer startup coins.
Is Musk’s Market Influence Illegal?
The trends seen following Musk’s comments and the subsequent increases and decreases in coin values have led to speculation across online platforms that the billionaire is running an illegal pump & dump scheme. Musk denied an allegation on Twitter, confirming: “I have not sold any of my Bitcoin. Tesla sold 10 percent of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.”
Due to the unregulated nature of the cryptocurrency market there is not likely action to be taken against Musk.
Are Musk’s actions justified? We’ll only know as the future of crypto unfolds. Tell us your thoughts with us at 516-541-654 and visit our website for more news and information.