Two days after declaring he was taking a break from Twitter, Elon Musk has returned with a vengeance—sending a flurry of tweets about Dogecoin.
The world’s richest man has a rather surreal infatuation with DOGE, a cryptocurrency that was started as a joke between two developers back in December 2013.
After removing #bitcoin from his Twitter bio, one of his first tweets after breaking his silence featured a picture of a rocket in front of the moon—followed by one word: “Doge.”
Musk then shared a picture from the Disney film The Lion King—the scene where Rafiki holds Simba above his head. A sneaky bit of Photoshop action was applied, with Musk’s head superimposed on Rafiki’s… and Simba’s face replaced with that of a shiba inu.
“Dogecoin is the people’s crypto,” he wrote. “No highs, no lows, only Doge.”
Inevitably, Musk’s latest tweets helped DOGE to skyrocket—and according to CoinMarketCap, the memecoin has risen by 57% in the past 24 hours.
No laughing matter?
Musk’s eccentric tweets to his fan base of 45 million people have undoubtedly caused a lot of amusement—with the mainstream media speedily writing up articles about his Dogecoin endorsement in a “funny old world” fashion.
But there’s a more serious question to be asked here—what sort of impact is Musk having on the crypto market, and is this a practice that should really be encouraged?
The billionaire has landed himself in trouble for his Twitter habits before. Back in August 2018, he posted a tweet that revealed he had “funding secured” to take Tesla private at $420 a share. This subsequently caused shares in the electric vehicle maker to spike by 13%—prompting the SEC to allege that Musk had violated securities laws in the process.
Musk later reached a settlement with the SEC after a stand-off that lasted several months, meaning that he would be prohibited from tweeting about Tesla’s financial condition unless an “experienced securities lawyer” was able to review the message first.
Obviously, the scope of this agreement doesn’t extend to cryptocurrencies—but new research powerfully illustrates the impact that Musk’s tweets have on Bitcoin and Dogecoin prices.
On Feb. 3, Blockchain Research Lab released a paper that examined how his posts affected short-term cryptocurrency returns and trading volumes—covering six incidents that occurred over the past six months or so.
The paper found that each incident led to “significant increases” in trading volume—especially when his tweets appeared to be spontaneous and unrelated to earlier market movements.
When Musk added #bitcoin to his Twitter bio, BRL says there was a cumulative abnormal return of 6.31% over 30 minutes—rising to 13.19% over an hour and 19% over seven hours.
And when he tweeted “One word: Doge,” this cumulative abnormal return stood at 8.17% over the space of five minutes, peaking at 17% over an hour.
Although BRL acknowledged that Musk later said his tweets about DOGE were designed to be a joke, author Lennart Ante said that the change to his Twitter bio “might have been meant to be a serious sign of support for Bitcoin”—and warned that it’s also possible that negative tweets in the future could cause the crypto markets to crash. They added:
“Our results lead to the question under which conditions people in the public eye should comment on specific cryptocurrencies. If a single tweet can potentially lead to an increase of $111 billion in Bitcoin’s market capitalization, a different tweet could also wipe out a similar value.”
After appearing to be rather skeptical about Bitcoin in recent years—so much so that he only owned 0.25 BTC that was sent to him by a friend—Musk’s tune on crypto has changed substantially in recent months. In a recent discussion on the Clubhouse social network, he described Bitcoin as a “good thing” and admitted he was late to the party in embracing digital assets.
Musk said: “I think Bitcoin is really on the verge of getting broad acceptance by conventional finance people.”
What remains to be seen is whether the entrepreneur’s support for Bitcoin will turn into something tangible—such as Tesla accepting crypto as a payment method or moving some of its treasury assets into BTC.