Elon Musk’s recent tweet on cryptocurrency wreaked havoc on the already volatile markets.
Influencer culture is just a new name for an old phenomenon. Think back to your teenage years. Even a single nod from the popular kid carried way more value than your parents’ opinions.
People with celebrity status have always influenced beauty, fashion and fitness markets. In today’s world, that translates to power in numbers, i.e., followers, and the power an influencer wields over their actions.
Think back to Kylie Jenner’s 2015 DIY lip plumping challenge. Thousands of teenage and pre-teen girls worldwide stuck their lips inside shot glasses and suctioned until their lips were swollen, to emulate the reality star’s newly surgically enhanced fuller lips. (For the record, Kylie denied going under the knife.) The challenge was not only dangerous, but the plump effect was only temporary.
But Kylie also demonstrated her influence over the financial markets in February 2018. A single tweet from the reality star wiped close to $1.3 billion (R17.8 billion) from Snapchat’s stock. Kylie, who had been a long-time user of Snapchat, tweeted that she was not impressed with the redesign and that she no longer used the app.
Snapchat stocks tanked the following month again after pop star Rihanna slammed the app for an offensive advert asking users if they would rather slap her or punch RnB singer Chris Brown. The advert came on the back of Chris pleading guilty to violently assaulting her during a lovers’ spat. In an Instagram story, Rihanna called the advert insensitive to domestic violence survivors and called on her fans to delete the app. Snapchat lost $800 million (R10.9 billion) following the incident.
It didn’t end there; model and influencer Chrissy Teigen told her 10 million Twitter followers that she wouldn’t be using Snapchat in support of Rihanna. Snapchat lost a further $100 million (R1.3 billion) following that tweet.
Tesla and SpaceX founder Elon Musk is another influencer with the power to swing the markets with a single tweet. Most recently, his witty commentary on bitcoin and dogecoin wreaked havoc on the already volatile cryptocurrency markets. Just last month, the tech billionaire tweeted that Tesla will no longer accept bitcoins as a form of payment. That tweet saw the price of bitcoin drop from $60,000 (R823,000) per coin to between the $40,000 and $38,000 mark (R548,000-R521,000).
In April, he tweeted that Tesla would offload 10 percent of its stake in bitcoin, setting panic amongst its investors. But he was quick to say his bitcoin investment remains the same, and he wanted to check its liquidity.
Chief trading strategist at CMTrading Fred Razak said, “Key people and trendsetters affect the markets by leading in terms of understanding where the markets are going. Individuals like Bill Gates, Warren Buffet, Jeff Bezos and the outspoken Elon Musk have unique insight into where the markets are headed because they see the numbers.”
But Fred believes these trendsetters need to remember that their opinions influence the financial markets and set trends for other big businesses.
“Having said he would take bitcoin as tender at Tesla, Elon retracted that, and it had a short-term effect on the value of the cryptocurrency. But in-between that, other companies – including PayPal, one of Elon Musk’s previous companies, Visa and Mastercard – jumped on board, saying they would accept bitcoin. This shot the value back up,” said Fred.
Elon’s tweets supporting a joke crypto called dogecoin also saw that coin’s value shoot up to such an extent that he was nicknamed “The Dogefather”. But during an SNL appearance, Elon referred to dogecoin as a ‘hustle’, plummeting the coin’s value and disappointing an army of individual investors who had bid it higher before the programme aired.
Elon’s influence over the cryptocurrency markets goes against the basic principle underlying decentralised finance, which is resistance to any entity or individual control of the currency. The crypto community has rallied against the electric car inventor’s influence by creating a currency called $STOPELON, which saw a price surge of nearly 5,000 percent in a single day, with a market cap of $24.9 million. (R340 million)
However, this isn’t Elon’s first rodeo. In 2018, the US Security Exchange Commission fined him and Tesla $20 million (R274 million) in penalties after he tweeted that he could take Tesla private at $420 (R5,761) per share According to the SEC’s complaint, “Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.”
Elon also had to step down as chairman of the Tesla Board, and Tesla had to appoint a new committee of independent directors to oversee his communications.