How Elon Musk Moves The Price Of Bitcoin With His Twitter Activity

OBSERVATIONS FROM THE FINTECH SNARK TANK

With more than 47 million followers on Twitter, Elon Musk’s tweets get a fair amount of attention.

That’s an understatement, of course. His tweets move markets. When he changed his Twitter bio in late January to #bitcoin, the price of Bitcoin rose nearly 20% in a matter of hours.

Musk has also tweeted about Dogecoin, but claimed recently in a Clubhouse chat that his tweets about the cryptocurrency are “jokes.” Jokes or not, when Musk tweets, people listen—and act.

What impact does Musk actually have on the price of Bitcoin and Dogecoin?

Measuring the Musk Effect on Cryptocurrency

Lennart Ante of the Blockchain Research Lab in Germany set out to measure the Musk effect. He identified six recent Musk tweets (or “events” like changing his Twitter bio) that referred to cryptocurrencies—two of mentioning Bitcoin and four citing Dogecoin.

Ante then mapped the corresponding minute-by-minute close prices, trading volume, and number of trades from the cryptocurrency exchange Binance for 10 hours before each tweet through 6 hours after the tweet (or event) for either Bitcoin or Dogecoin.

Event #1: Changed Twitter Bio to #bitcoin

Within roughly one hour of Elon Musk changing his Twitter bio to #bitcoin on January 29, 2021, the price of Bitcoin skyrocketed from around $32,000 to nearly $38,000. It dropped to about $36,000 in the subsequent hour—likely due to some profit-taking— but then climbed back up to $38,000 over the next hours.

Trading for Bitcoin in the hours leading up to Musk’s bio change was averaging below 5,000 trades per hour. In the 60 minutes following the bio change, trading jumped to more than 20,000 trades before coming back down closer to its normal trading range.

Event #2: Posted a picture about Dogecoin

Musk’s posting of a picture about Dogecoin on January 28 didn’t have the immediate impact on that cryptocurrency that the changing of his Twitter bio did—but the impact was still substantial.

Roughly four hours after the tweet, the price of Dogecoin had nearly quadrupled before losing almost 50% of the new high in the subsequent two hours. Similar to the previous day’s Twitter event, Musk’s Dogecoin tweet helped produce a short-term burst of trading about five hours after the tweet.

Event #4: One word: Dogecoin

Musk’s December 20, 2020 tweet—and changing of his Twitter bio—had one of the biggest impacts of his Twitter activity. According to Ante:

“The average trading volume of DOGE/USDT in the 30 minutes before the event was about $1,942 per minute with an average of 9 trades per minute. During the 30 minutes after the tweet, the average trading volume per minute was about $299,330 with 775 trades per minute.”

Event #5: Bitcoin is my safe word

Not all of Musk’s Bitcoin and crypto tweets have a positive impact on prices. His December 20, 2020 tweets “Bitcoin is my safe word” and “Bitcoin is almost as bs as fiat money” were followed by a roughly 1.7% decline in the price of Bitcoin, with no measurable change in trading volume.

Should Investors Buy and Sell Bitcoin on Musk’s Tweets?

In his study, Ante concludes:

“Four of [Musk’s] Twitter activities are likely only reactions to previous market events and relate to little or…