Is Musk behind Dogcoin?

Is Musk’s series of operations for dogcoin market manipulation?

Will Elon Musk's SNL appearance help Dogecoin break $1?

Recently, Elon Musk and Tesla have had a uniquely large impact on the price action of Bitcoin and Dogcoin. Through a series of announcements, tweets and Saturday Night Live banter, Tesla and its Musk have driven the price spike and may have helped drive the entire cryptocurrency market.

But some may wonder if all these signals signal market manipulation. Musk has already had a track record of reckless behavior before; in 2018, he paid a $20 million fine to the SEC for posting misleading tweets about Tesla stock. But whether it crossed the line or not, Musk’s adventures in cryptocurrency shed light on how the token market works and the larger issue of market influence in the age of social media.

On the evening of May 13, Musk tweeted that he was “working with Dogcoin developers to make the system more efficient for trading.” Dogcoin’s price immediately jumped 14 percent and continues to climb. Musk’s mention of dogcoin for weeks on end continued to drive it skyrocketing, even though it actually started as a joke and didn’t have any substantial technical features.

The rapid growth of dogcoin since the beginning of April is largely due to Musk. But he called dogcoin “a gimmick” when he hosted Saturday Night Live on May 8. That dismissive quip sent dogcoin down more than 35 percent.

Musk and Tesla have also been firmly influencing the price of bitcoin. Tesla first announced it would accept bitcoin payments on February 8, along with an announcement that it would purchase $1.5 billion worth of the cryptocurrency. This announcement pushed the price of bitcoin above $50,000 for the first time ever. When the option to support Bitcoin payments went live on March 24, it was apparently clunky and actually so primitive that buyers apparently ran the risk of entering the wrong wallet address. Despite this, the price of bitcoin still rose to over $58,000.

This week, Musk announced that Tesla would no longer accept bitcoin payments due to environmental concerns. Bitcoin then plummeted nearly 10%.

These rallies and falls are driven by the most powerful logic in cryptocurrency speculative trading: adoption is everything. Since the dawn of cryptocurrencies, the acceptance of crypto payments by new companies, the listing of new exchanges and the announcement of major new investments have been the biggest and most consistent drivers of price volatility.

This logic, combined with Tesla’s reputation for innovation and Musk’s immense personal influence, means they have tremendous power to drive the cryptocurrency market.

This power has brought Tesla lucrative profits, though in a way that may make conspiracy theorists suspicious. Tesla sold about 10% of its bitcoin for a profit of $101 million after the price of bitcoin rose, boosting first quarter earnings by nearly 30%.

In a way, Tesla and Musk’s power to drive the market is no different than that of veteran investors like Warren Buffett or Stanley Druckenmiller. They are able to lead the market because people trust their judgment.

But this is almost inevitably a gray area. Earlier this year, reporting on the WallStreetBets and GameStop events, Bloomberg’s Matt Levine outlined the crux of the dilemma

“If you buy a stock with the intention of pushing up the stock price so that other people will buy it, that’s market manipulation. If you buy a stock in the hope that the price will go up because other people will buy it, that’s not market manipulation; that’s normal, and these things aren’t so different.
This ambiguity certainly applies to Tesla’s bitcoin investment. Tesla’s market position means that its purchase is a self-fulfilling prophecy. The question now is whether the Bitcoin purchase is based on this potentially manipulative theory or on a broader genuine belief in the asset. These questions may ultimately remain unanswerable, because these motivations are so difficult to distinguish.

As for Musk’s fascination with dogcoin, the situation is even more unclear. Reuters and others have been unable to determine whether Musk has a personal standing in dogcoin, which would be a prerequisite for any real cross-border manipulation. There is speculation that the SEC might be interested in his activities, but there is no clear evidence that they are.

But Musk’s control over Dogcoin’s words may be more important than the legal issues. If he really sets his mind to it, he could screw it up tomorrow. Or he could just lose interest and leave his dogcoin followers to fend for themselves. Whatever Musk’s intentions, this puts dogcoin holders in a uniquely vulnerable position, dependent on the goodwill of one man to hold billions of dollars in nominal value.

As for those dogcoin developers Musk says he is talking to? Dogcoin doesn’t even have a particularly strong development community, and CoinDesk has been unable to determine who he’s referring to.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/is-musk-behind-dogcoin/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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