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What did Elon Musk do? Reasons for Bitcoin’s surge and plunge

The Financial Services Agency of Japan warned that crypto assets should be carefully dealt with in the formation and sale of investment trusts, etc. that invest in such assets, as it has been pointed out that they are promoting speculation. (* 1).

That vigilance has become a reality. The price of Bitcoin, the most influential crypto asset, has been volatile, rising and falling.

The price of 1 Bitcoin on January 1, 2021 was 2,981,601 yen, but on April 15, it soared to 6,856,257 yen. It jumped 2.3 times in just four months.

However, it plummeted to 3,988,327 yen on May 20, a 42{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} reduction compared to April 15 (* 2). It can be said that the fact that what is called assets is reduced by 40{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} in less than a month is certainly “promoting speculation.”

Bitcoin was originally known for its volatile prices, but this early 2021 move could have been triggered by an American. That person is Elon Musk, the founder and CEO of Tesla, an American electric car maker.

What did Mr. Musk do?


Bitcoin price movements

  1 Bitcoin price
(unit: yen)
Comparison with the upper row
2021/1/1 2,981,601  
2021/2/20 6,043,546 103{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}
2021/3/22 6,189,585 2{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}
2021/4/3 6,577,256 6{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}
2021/4/15 6,856,257 4{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}
2021/5/20 3,988,327 -42{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7}

Check the price movement of Bitcoin in the first half of 2021 (* 2).

I chose this date in consideration of the symbolic price and Mr. Musk’s noteworthy remarks.

“Comparison with the upper row” in the table means that, for example, 6,043,546 yen on February 20th is 103{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} higher than 2,981,601 yen on January 1st.

The price on April 15th is 2.3 times that of January 1st, and the price on May 20th is 42{5f3ac39ba1b9031997b955ac72c92bb5456d725b06fa10f02cdda1ab745591c7} lower than that of April 15th. In the investment world, violent price movements are sometimes described as “roller coaster-like,” which is exactly the case.

Mr. Musk’s Bitcoin-related behavior

Next, I would like to introduce Mr. Musk’s words and actions related to Bitcoin.

Mid-January 2021 Mr. Musk describes “# bitcoin” on Twitter (* 3)
It becomes clear that Tesla, whose CEO is Mr. Musk , has purchased Bitcoin worth 160 billion yen (* 4).
2021/3/24 Mr. Musk tweeted that “I can now buy Tesla’s electric car with Bitcoin” (* 5)
2021/5/16 “Mr. Musk’suggested that Tesla sold Bitcoin'” (* 6)
2021/5/17 Mr. Musk tweeted that “Tesla does not sell Bitcoin at all” (* 7)

It may be wondering if Mr. Musk just wrote “# bitcoin” on Twitter in January and it would be big news. That’s because Mr. Musk isn’t just a noisy person. In fact, Tesla is buying 160 billion yen worth of Bitcoin.

Mr. Musk is the CEO of Tesla, but since Tesla is a listed company, he bought Bitcoin as a corporate investment activity. However, since Mr. Musk is Tesla’s CEO and founder, it is natural to think that Tesla’s actions are Mr. Musk’s intentions.

And in March, Musk announced that he was able to buy Tesla’s electric cars for Bitcoin. This, of course, would be an expansion of service to Bitcoin-owning customers. But the bottom line is that if Bitcoin gets a lot of attention, prices will go up and Tesla’s unrealized gains on Bitcoin investment will grow.

When the media reported on May 16 that he had “sold Tesla’s Bitcoin,” Musk completely denied it the following day, on the 17th. It should be seen that the intention of not wanting to reduce the value of Bitcoin worked.


What you can see from the price movement of Bitcoin and Mr. Musk’s behavior

Combining the above two tables reveals two things:

● If Mr. Musk makes a positive statement for Bitcoin, the price of Bitcoin will rise.
● If Mr. Musk makes a negative statement, the price will fall.

The plunge on May 20 was a move following the negative press on May 16, but on the 17th, Mr. Musk totally denied that “Tesla does not sell Bitcoin at all.”

From this, we can see that even Mr. Musk, who has the power to move the price of Bitcoin, does not have the power to control it. A glimpse of the horrifying side of speculation.

Why Mr. Musk lost interest in Bitcoin

There is a serious remark by Mr. Musk that was not introduced in the table above.

On May 12, 2021, Mr. Musk announced that he had stopped making Tesla electric cars available for purchase with Bitcoin (* 8). Why did Mr. Musk suddenly lose interest in Bitcoin?

Large amount of power consumption? Shareholder pressure?

Mr. Musk commented on the reason why he could not buy an electric car with Bitcoin (* 8).

● The increase in electricity consumption (necessary to operate Bitcoin) is out of the ordinary

Bitcoin uses a lot of computers, so it consumes a lot of power. The amount of electricity consumed by Bitcoin in one year exceeds that of Norway in one year (* 9). Mr. Musk probably didn’t like this non-eco-friendly mechanism.

However, the fact that crypto assets require a large amount of power has been known all over the world for many years, so it is “impossible” to cite as the reason for losing interest in Bitcoin now. ..

The Nihon Keizai Shimbun, in the opinion of analysts, introduces the theory that Mr. Musk may have been under pressure from Tesla’s shareholders (* 8).

The analyst speculates that Tesla may have been criticized for refraining from non-eco-friendly behavior, as Tesla is an electric car maker and electric cars are a symbol of eco.


Did the investment become less attractive?

So why was Mr. Musk interested in Bitcoin investment in the first place? In February 2021, Mr. Musk said this (* 10).

● It is foolish not to look elsewhere when the real interest rate of fiat currency is negative. Bitcoin is almost as worthless as fiat currency. The keyword is “almost”.

A straightforward interpretation of this phrase would be, “If you deposit in a bank, you won’t get an interest rate, but if you invest in Bitcoin, you will make a small profit.”

From this statement, we can see that Mr. Musk saw Bitcoin as an attractive investment product. And, after all, if you interpret Mr. Musk’s words and actions honestly, he started investing because he was attracted to Bitcoin, but he realized that it was not attractive and diminished his interest.


Summary-It turns out that the risk is still large

What we can learn from Mr. Musk’s behavior and Bitcoin price movements is that crypto asset investment is still risky.

Bitcoin is gaining citizenship, but it will take a great deal of preparedness for the average individual investor to take on the challenge. And I think Mr. Musk learned the same thing.

On May 19, 2021, Tesla’s stock price fell, and the company has lost a market capitalization of approximately 33 trillion yen since January (* 11). Analysts cite sluggish sales of electric vehicles in China and a fall in Bitcoin prices as factors behind the decline in Tesla stocks.