Introducing Inquisitorial by Indianaut, a long-form newsletter where we explain and analyze important stories stemming out of the Indian entrepreneurial ecosystem & economy. New articles every Saturday & Sunday.
Elon Musk, one of the most prolific minds of this century, also happens to be the greatest curator of wacky crypto memes on Twitter (or as some would call it, a shitposter). His headline-grabbing tweets about technology, space, product announcements, and memes have been a Twitter staple and enabled him to amass a cult-like following on the social media platform.
Like everyone and their uncle at this point, Elon Musk has an opinion on cryptocurrencies.
The Tesla and SpaceX CEO stated, “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin”.
Further adding Bitcoin is really on the verge of getting broad acceptance by conventional finance people in a recent discussion on Clubhouse.
The optimism about Bitcoin or cryptocurrencies, in general, is not unheard of, after all, Elon Musk was one of the founders of Paypal and has experience in the domain of online transactions and banking. However, it was Elon’s unwavering support of joke cryptocurrency Dogecoin that stumped everyone. The cryptocurrency with the mascot is a meme-worthy Shiba-Inu that can’t quite spell or get its grammar right, was created in 2013 as an ironic response to two big internet phenomena in two friends and meant to be worthless.
Elon Musk has been sharing Dogecoin memes since 2019 when he was appointed as the cryptocurrency’s CEO by its Twitter account. While every tweet about Dogecoin memes sent out by Elon Musk-led to a small surge in price and popularity of the cryptocurrency, his tweets during the bull run sent the parody-cryptocurrency in uncharted waters.
Elon Musk’s consistent tweets about the cryptocurrency made it the best performing major cryptocurrency, leaving Bitcoin and Etherium in the dust. More platforms started supporting the cryptocurrency on its platform, including the infamous Robinhood. The cryptocurrency grew at a blistering pace. The cryptocurrency was trading around USD 0.008 in late January 2021 to a lifetime high of USD 0.73 within a span of 4 months, becoming the fourth most valuable cryptocurrency with a market cap of over USD 70 billion for a brief period.
The steep increase coincided with Elon Musk’s announcement that he will be hosting Saturday Night Live and that he planned to take Doge to “the moon” on a SpaceX rocket in 2022. The "DOGE-1 Mission to the Moon" is in collaboration with a Canadian company, Geometric Energy Corporation. The Mission paid for in Doge and has been touted as Elon to be the first crypto and meme to be in space.
When the Music Stops
Dogecoin holders who were speculating that the coin might breach the USD 1 mark during Elon Musk’s SNL appearance were in for a rude shock. Musk, in one of the skits of the show, played himself and tried to explain what a “Dogecoin'' is to newsreaders. However, he called the cryptocurrency "a hustle" on the show and the prices slumped to 47 cents when the show started, before recovering at around 55 cents.
As soon as Dogecoin started tumbling, social media exploded with memes and comments, bringing nothing but top-tier entertainment to fence-sitters. While some investors continued to HODL the cryptocurrency, waiting for it to reach the moon, others started writing its eulogy for not only Dogecoin but altcoins in general, calling it a speculative instrument and a volatile asset not worth owning.
On 13th May, only a day after the poll about whether Tesla should accept Dogecoin, Elon Musk announced that Tesla will no longer be accepting Bitcoins from customers that the company had started accepting from its customers on 24th March 2021, citing its carbon footprint but clarified that Tesla will continue to hold USD 1.5 billion worth of Bitcoin it had bought a few months earlier. While Bitcoin had been cooling off its peak high of USD 65,000 in mid-April, Bitcoin tumbling over 30% after the announcement.
On 14th May, Elon Musk tweeted that he was working with Dogecoin’s developers to “improve system transaction efficiency. Dogecoin developer Ross Nicoll told Decrypt by phone on Friday that since Musk started talking to the developers in 2019, they are working to further reduce the cryptocurrency’s energy consumption—which, by one estimation on Thursday, is already just 7% of Bitcoin’s. They are currently finalizing the cryptocurrency’s 1.21 upgrade—the biggest since 2019.
Wait, What?
While many investors are shocked over Elon Musk’s conduct, saying it was akin to pulling the rug from under them, our resident cryptocurrency guru Dilip Mishra has always been vary of Elon Musk’s bait and switch tactics and called anyone who fell for it a “normie”.
It is unlikely Elon Musk, the thought leader he is, was oblivious to the carbon footprint of Bitcoin mining or transactions before Tesla decided to buy USD 1.5 Billion worth of cryptocurrency. Many speculate it was a tactic to sell more cars but Tesla did not sell a single car through Bitcoin and hence decided to end the policy. It is also quite shocking Elon Musk pointed out the drawbacks of an asset which his company owns. It would be shocking if Tesla had to report a loss this quarter caused primarily by its CEO trash-talking one of its assets. Fortunately, Tesla doesn’t have to do that because if the price of Bitcoin ever gets lower than what they paid for it, Elon Musk can just make the price go back up again. If this happened, we would definitely get to watch a rematch between the SEC and Elon Musk.
Whichever side you are on, there really is something unprecedented and almost magical about Elon Musk’s continuing ability and inclination to move the prices of Bitcoin and Dogecoin with his slightest whim. It seems that there is no limit to the power. Elon Musk was the apple of many laser eyes on Twitter, but with his latest trolling of cryptocurrencies, crypto traders now show disdain for his tweets.
But this hasn’t stopped Elon. Musk is currently causing rallies in another meme-coin called CumRocket.
This tweet caused the price of CumRocket to shoot up by nearly 400 percent in just 10 minutes. The alternative crypto, which describes itself as “the leading 18+ NFT platform for adult creators”, rose from $0.06 to $0.28 on Saturday following the tech billionaire’s apparent endorsement, before stabilizing to a price of $0.15 (as of Sunday, June 6th).
Elon Musk’s trolling of the cryptocurrency space also signals how to market influencers today are different from those in the past. Investors in the past used to trade on the basis of trades made by successful fund managers and institutional investors, some read through books authored by experts by Benjamin Graham and Peter Lynch while others were influenced by the analysis of quarterly reports by Business newspapers and news channels. Today, that position has been assumed by Elon Musk who is an entrepreneur, not a portfolio manager, Chamath Palihapitiya, David Portnoy, and millions of users on Reddit who had previously sent shares of GameStop and a few other companies to the moon using memes.
The lack of any regulatory oversight over the cryptocurrency markets really comes to the forefront with issues like this as there are no disclosure obligations or insider trading laws. There is nothing that prohibits Elon Musk, the second richest person on the planet, from buying lots of Bitcoin and Dogecoin before making them go up, possibly even to Mars.
The recent cryptocurrency bull run, which attracted a new wave of investors, will definitely accelerate the mass market acceptance of cryptocurrencies. It will also serve as a lesson for newbies investing in cryptocurrency. While investing in something fun and recognizable is easy, especially with discount trading platforms, it is always better to do your own due diligence.
Till then, we wish you the best of luck with your diamond hands.