- So you woke up this morning,
you checked your crypto portfolio
and (man gasping) what happened to my crypto?
- [Narrator] Lately cryptocurrency prices
have been going on a wild ride
and a lot of it has to do with Elon Musk.
- Look, I know I sometimes say or post strange things
but that's just how my brain works.
- [Narrator] The Tesla and SpaceX CEO
has a lot to say about cryptocurrencies, often on Twitter.
- Surprise.
You just got Eloned.
- [Narrator] While Musk is the only thing
impacting crypto prices, one thing is clear.
- When he tweets about cryptocurrencies,
it can move markets and that power is unparalleled.
- [Narrator] Here's how Musk has amassed
such influence over cryptocurrencies
and why some experts are raising alarms.
To understand just how influential Musk can be,
take a look here.
On May 12th, Bitcoin was continuing
on a steady downward trend,
running off of an all-time high the month before.
At 5 o'clock p.m., the cryptocurrency was hovering
around $55,000 and then at 6:06 p.m., this happened.
Musk tweeted that his electric vehicle company,
Tesla, would no longer accept Bitcoin as payment
due to concern over rapidly increasing use
of fossil fuels for Bitcoin mining and transactions.
After the tweet went out,
the price of Bitcoin plunged more than 5%,
losing around $150 billion by the end of the day.
- After that, he did have a lot
of people who were really upset with Elon Musk.
- [Narrator] Caitlin Ostroff,
who has been following Musk's influence
on the crypto market for The Wall Street Journal says
that there's been speculation
that a lot of the selling after Elon's tweet
was because retail traders weren't used
to the high volatility.
- People have to understand
that this thing, this is a dice roll.
- [Narrator] They suddenly got nervous
that they were going to lose profits and sold.
- They were replying to him on Twitter
and they were saying you just cost me X thousands of dollars
because all of a sudden my investment portfolio
was worth 5,000 and now it's worth maybe 4.
- [Narrator] But hasn't just been Bitcoin.
Musk has tweeted about other cryptocurrencies as well.
Take the once joke crypto Dogecoin.
- And it keeps climbing.
The meme-inspired cryptocurrency nearly doubling
over the past week alone.
This ahead of Elon Musk's appearance on SNL.
- [Narrator] Early on May 8th,
before Musk was slated to host an episode
of "Saturday Night Live,"
Dogecoin was trading around 73 cents.
Investors had been pumping money into the cryptocurrency
based on speculation that it could finally reach a dollar.
But that didn't happen.
During a skit he performed in the guise
of a financial expert,
the self-proclaimed Doge Father jokingly explained
what Dogecoin is.
- It's a cryptocurrency you can trade
for conventional money.
- Oh, so it's a hustle.
- Yeah, it's a hustle.
(audience laughing)
- [Narrator] By the time the episode ended,
the price of the crypto had plummeted around 30%.
- That comment alone rattled the confidence
that people had that Dogecoin
could keep pushing higher
and people took profits
and all of a sudden, it sold off.
- [Narrator] But then two weeks later,
Musk tweeted a picture of a Shiba Inu on a dollar
with the question how much is that Doge in the window?
Following his tweet, the price spiked.
- Dogecoin, unlike Bitcoin,
doesn't really have an investment case
and that means that Dogecoin
is really just a cryptocurrency built on memes.
The only reason it has any value at all at the moment
is because Elon Musk first started caring about it
and then Snoop Dogg started caring about it.
And then all of these other rappers
and celebrities starting tweeting about Dogecoin.
- [Narrator] While these are two of the most recent examples
of Musk influencing crypto, there are many more.
And there are other forces at play
that have allowed Musk
to amass the influence he has on crypto.
Over the last year,
there has been a flood of new retail investors,
largely driven by the rise
in no-fee trading apps, like Robhinhood.
Meltem Demirors, an executive
at the asset management firm CoinShares
says that no-fee trading apps
have increased the popularity of crypto
because people can access more types of assets
on the same platform.
- It's also made really illiquid cryptocurrencies
of the past much more liquid
because there's now much more retail participation.
- [Narrator] Some experts say younger people gravitate
towards Musk because they like his idea
of the future and see him as rebellious.
And Demirors says Musk's huge Twitter following
is a big part of his influence.
He has over 56 million followers.
- Financial markets, to some people,
are a form of entertainment
and so I think what we are seeing
is the gamification of clout on social media
where people are recognizing
that they can manipulate markets using social media
as a tool.
- [Narrator] but she says Musk's influence
on the crypto market has downsides.
- There is a wide range of ways
through which market participants
are acting on their desire to buy and sell cryptocurrencies
and as a result,
we see is more liquidity
but also more volatility
when people like the Elon Musk
are tweeting directly to retail.
- [Narrator] All assets are subject to ups and downs
but as you can see from the big swings on this chart,
crypto's especially volatile.
- All of a sudden, Elon has reminded people no,
this isn't just going up in a straight line,
it does come down and when it does, it can be fast.
- [Narrator] These market swings
can have a very real impact on retail investors
but for some, the risk is worth.
- Because there's no fundamentals,
it makes it really hard
to try and figure out where the floor is,
like where the fair value
and where the selloff should stop when it happens.
And so you inherently wind up having
a much more volatile market,
which is what appeals to some investors for this.
They don't want the steady returns
of the S&P where they have to wait 30 years
to get where they wanna be.
They want to get these fast, sharp returns.
- [Narrator] Some experts think that Musk's influence
on Bitcoin may be waning.
But for now, his tweets continue
to send shock waves through the crypto market.
(pensive music)