Dump Then Pump (Crypto Style)

A few weeks ago, I pleaded with Elon Musk to stop tweeting about cryptocurrencies over the weekend. Unsurprisingly, he didn’t listen. Yesterday, in a Twitter reply to an article that accused him of allegedly pumping and dumping bitcoin, he stated that Tesla (TSLA) would resume accepting bitcoin if mining uses mostly clean energy. The chart below shows the price movement before and after that reply:

3 Day Chart, Bitcoin vs USD with annotation from Musk Tweet

(Click on image to enlarge)

3 Day Chart, Bitcoin vs USD with annotation from Musk Tweet

Source: Bloomberg

That one tweet caused a nearly 10% jump in the cryptocurrency, which was then further boosted by a positive comment by Paul Tudor Jones on CNBC. Never mind that there is scant evidence that anyone had actually bought a Tesla using bitcoin except for once in 2013; the mere thought that someone could potentially buy one of their cars with bitcoin is obviously captivating the market. 

At the time, I expressed skepticism about the stated reasons for TSLA’s decision to stop accepting bitcoin. I found it incredulous that a talented engineer and advocate for cryptocurrency would suddenly discover that bitcoin mining was a huge energy hog. Instead, I laid out the reasons why anti-money-laundering (AML) concerns were a more likely motivation for the timing of that move. Shortly after the announcement, news broke about an investigation into Binance, and there were reports that the US Treasury would require special reporting of any cryptocurrency transaction with a value greater than $10,000.Tesla cars certainly fall into that category, so it would not be a stretch to think that the company would want to avoid that hassle. Blaming environmental concerns is more palatable than blaming AML concerns.

Far be it from me to accuse Elon Musk of obfuscating his crypto motivations to engage in pump and dump tactics in bitcoin. But over a month ago, in the wake of TSLA’s last earnings release, I asserted that there was a real incentive for him to use his power over the crypto market to bolster TSLA’s bottom line. The timing of this rally could prove quite convenient, coming just over 2 weeks from the end of the second quarter. It would be a boon to TSLA’s 2Q earnings if the company added to its bitcoin holdings recently and sold them into this rally. Done properly, they could continue to assert that they sold no more of the company’s original bitcoin stake.

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