Tesla and MicroStrategy are the two largest publicly traded corporate holders of Bitcoin, and some traders say that the companies’ CEOs, Elon Musk and Michael Saylor, are pumping the cryptocurrency and manipulating its price to avoid going underwater and being forced to sell.
Nasdaq-listed business intelligence company, MicroStrategy holds more than 92,000 Bitcoin at an average price of about $24,000 per coin and is considered the champion of Bitcoin. Electric vehicle maker Tesla bought $1.5 billion worth of bitcoin earlier this year at an average price of about $34,700 per coin, less than its current price. News of the buy sent the Bitcoin price rallying.
Several traders and market observers are saying on social media that Musk and Saylor helped bring about the cryptocurrency market crash last week. Both companies own Bitcoin and based on their purchase price, could go under water and be forced to sell.
Puru Saxena, a Hong Kong investment portfolio manager and popular investment commentator, said there are signs pointing to a $15,500 support level for Bitcoin. The current “bubble burst appears to be in progress” he tweeted on May 16.
Cryptocurrency investors woke up to bad news on Wednesday, May 19: A massive sell-off had prices crashing across the board, wiping more than $500 billion off the market. Bitcoin traded as low as $31,926 on May 19 after reaching an all-time high of close to $65,000 on April 15. Bitcoin was trading at $37,992.17 as of this writing.
Both Musk and Saylor insisted that they were not selling their Bitcoin. “Entities I control have now acquired 111,000 #BTC and have not sold a single satoshi. #Bitcoin Forever,” Saylor tweeted on May 19.
Also on May 19, Musk tweeted that Tesla is a “diamond hands” holder — a meme in which the holder makes it clear that they are holding and not selling.
However, both companies could be forced to sell their Bitcoin at a certain price due to fiduciary duties. The decision could be out of their hands, according to Michael Kao, a Los Angeles-based investment analyst
For Saylor, “as a steward of publicly traded company along with a board of directors charged with the same fiduciary duties to shareholders/creditors, the decision to HODL a 100%+ vol asset might be wrested out of his hands at the most inopportune moment,” Kao tweeted @UrbanKaoboy.
Kao added that he has written at length about how Saylor’s decision “to issue 2 convertible bonds to HODL BTC have created extremely destabilizing influences in the MSTR capital structure.”
Both Musk and Saylor have been in trouble with the U.S. Securities and Exchange Commission. Musk was charged over a tweet and settled with the SEC in September 2018 on fraud charges. He had to step down as Tesla’s chairman, appoint more independent directors and pay a $40 million fine. Musk tweeted on Aug. 7, 2018 that he could take Tesla private at $420 per share, that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC said Musk knew that the potential transaction was uncertain, lacked financing partners, and his statements were not based in fact. The SEC said Musk’s misleading tweets caused Tesla stock price to jump more than 6 percent on Aug. 7, and led to market disruption.
In February, Musk tweeted that he would welcome an SEC investigation into his tweets on Dogecoin amid talk about that being a possibility over his consistent promotion of the meme coin. “I hope they do! It would be awesome,” he tweeted.
In 2000, Saylor and two other MicroStrategy officials were charged with fraud by the SEC for falsely reporting massive MicroStrategy profits despite the company losing money, artificially inflating its value. Saylor and the other two were forced to settle for cooking the books. Saylor was fined $350,000 and had to return $8.3 million to shareholders.
On May 12, Musk made a U-turn on bitcoin, saying that he will no longer allow his company’s electric vehicles to be bought using the cryptocurrency because of environmental concerns. Hundreds of billions of dollars were wiped off the entire cryptocurrency market within three hours of Musk’s tweet.
Cambridge University researchers created an online tool that estimates bitcoin electricity consumption. The Bitcoin Electricity Consumption Index shows that bitcoin consumes about 124 Terawatt-hours per year — about a half-percent of the world’s total consumption and as much as Pakistan’s. Five of the six mining pools that perform more than 80 percent of Bitcoin mining are located in China or managed by Chinese organizations.
On May 24, Musk tweeted that he had spoken with North American Bitcoin miners. “They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising,” Musk said.
Four minutes later, the price of “Bitcoin just pumped $1500 on this tweet,” observed Joe Weisenthal @TheStalwart, co-host of the “Odd Lots” podcast and “What’d You Miss?” on Bloomberg TV
Saxena found Musk’s “Spoke-with-North-American-Bitcoin-miners” tweet to be problematic. About 65 percent of Botcoin is mined in China and North America only mines a small percentage of total #BTC, Saxena tweeted.
“My guess is Elon and Saylor are pumping Bitcoin so they can get back to breakeven and sell,” HOZ
Paul Wimmers, who describes himself as a short-term trend/momentum trader, tweeted, “More likely, Elon wants to lift the price so he can get out without a loss.”
Michael Krieger, the founder of Liberty Blitzkrieg blog, has described Bitcoin as a representation of a path or blueprint for humanity to follow— not just with money, but with nearly everything.
“Big time psychological manipulation happening in bitcoin,” Krieger tweeted on May 24. “Billionaire helps crash price via his commentary and then the implicit carrot is price will rise again if we go along with his plan. Nah I’m good.”
Saxena was angered at Musk’s ability to move markets with a tweet. Bitcoin “swings like a pendulum based on one man’s tweets! If it was regulated, this man would be sent to prison for manipulation. Boils my blood,” Saxena tweeted. “Really looking forward to the day when Bitcoin and other crypto are regulated so all manipulators can get what they deserve – jail time. This charade has gone on for far too long.”
A new meme cryptocurrency $STOPELON has emerged in an effort to counter what it describes as Musk’s crypto market manipulations. $STOPELON says it is solely dedicated to stopping Musk. The cryptocurrency was built with meme-like goals by “a community created to destroy the biggest market manipulator of them all”, according to CNBC TV. The crypto is being traded at around 0.00005600 with a $30 million market capitalization.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?