In the cryptocurrency market, where there are almost no regulators, we can say that the concept of “Free Market” advocated by Adam Smith is experiencing its peak periods. As such, individuals or groups who want to take advantage of “free market” features are on their way to becoming even richer by manipulating the market. Especially for Bitcoin to become a currency in the future, these manipulations need to be prevented. Since the existence of regulators will also hinder the “decentralization” feature of the crypto money markets, it will unfortunately not be possible for such measures to be taken by the regulator institutions.
The cryptocurrency market is affected by many events. Like the Chinese example, the price could fall if it is leaked that major governments are undecided on how to regulate Bitcoin or on issues such as taxation and mining. Or Elon Musk can read the market with his tweets. The purchase or sale of Bitcoin by someone very famous is also followed by the market and reacted accordingly.
There are other factors that affect Bitcoin prices. There are a large number of Bitcoins, and they are produced at a predictable rate. These Bitcoins are unevenly distributed. Some Bitcoin giants have a large amount of accumulation in their wallets (digital storage). This, coupled with the cash they hold, makes it easier for people to manipulate the market.
In some cases, large investors selling high volumes of bitcoins may lower the price. In 2014, one such investor, nicknamed BearWhale, temporarily crashed the market by selling large amounts of Bitcoin (about 30,000 units) below market value.
Looking at recent developments, Tesla and SpaceX CEO Elon Musk tweeted that he is “working with DOGE developers to improve system operation efficiency.” The price of the Doge immediately rose by 14% and continued to rise. Musk and Tesla are also moving the Bitcoin price drastically. Tesla first announced on Feb. 8 that it would accept Bitcoin as payment, while at the same time announcing that it had purchased $1.5 billion worth of Bitcoin. This announcement helped the Bitcoin price rise above $50,000 for the first time.
Then this week, Musk announced that Tesla would no longer accept bitcoin for payment due to environmental concerns. Bitcoin has fallen almost 10%. And the 2nd shock was experienced with the number of those who bought Tesla with bitcoin as 0. The reaction of this event, which was thought to be as if a queue had formed in the purchase of Bitcoin and Tesla, showed how important even such news is in market manipulation. On the contrary, since its early days in the crypto market, the announcement of new companies accepting crypto payments, new stock exchange listings, and new large investments has been the biggest and most consistent drivers of price movement.
Tesla and Musk’s power to drive the markets is no different from that of seasoned investors like Warren Buffett or Stanley Druckenmiller. They are able to lead the markets because people trust their decisions. There are several reasons why Elon Musk makes such moves. He wants to be seen as the man of the future. He wants to be part of the next big thing. He wants to do the next big job. And he believes that cryptocurrencies are the future, and he says so on every program he comes out. That is why it makes a lot of noise in the cryptocurrency market. A colorful character, he dominates the news and moves the markets greatly. But the fact that it dominates the crypto money market so much is the kind that worries it. When a multibillionaire joke can make a few tweets about a cryptocurrency and move hundreds of billions of dollars, it shows how open the cryptocurrency market is actually to manipulation.
On May 19, as markets fell sharply, Elon Musk tweeted that “Tesla Has Diamond Hands.” Diamond Hands is a popular phrase used by cryptocurrency investors to refer to people who HODL cryptocurrencies even when prices are falling. A person with ‘Diamond Hands’ is considered a crypto ‘veteran’ who knows that holding cryptocurrencies is much more profitable in the long run compared to selling them when prices drop. Elon Musk’s tweet about Tesla owning the Diamond Hand was a message that meant Tesla would continue to HODL its Bitcoins instead of selling them when the price dropped.
As a result, Elon Musk has become an influential figure in the crypto world. Tesla’s tweet a week ago about not accepting payments wiped out 17% of Bitcoin’s price overnight. Musk’s tweets supporting Dogecoin for months caused the Dogecoin price to rise to $ 0.71. Many people in the cryptocurrency market are not happy with the impact of a single person like Elon Musk on the markets.
