Elon Musk, owner of Tesla, SpaceX, OpenAI, Neuralink, and The Boring Company is well known for his fascination, or shall we call it a love-hate relationship with cryptocurrency. In this rocky relationship, Musk has expressed his love for cryptocurrencies, endorsed them, and then decided they are incongruent with his passion for environmental sustainability. Like anyone truly in love, Musk couldn’t keep his feelings to himself. How could he with 55+ million Twitter followers!
When Musk tweeted bitcoin was “probably a good thing” followers wondered if he was the anonymous founder of Bitcoin, which he denied. Some years later, Musk tweeted Tesla invested over one billion in Bitcoin and would accept Bitcoin for the purchase of its much sought-after electric cars. This drove the price of Bitcoin to an all-time high price of $58,000. The Bitcoin price curve continued to slope upward until Musk’s tweet announcing Tesla sold 10% of its Bitcoin holdings, thus pushing Bitcoin prices down.
In May 2021, Elon Musk informed his 55+ million Twitter followers that Tesla would no longer accept Bitcoin for the purchase of its cars, which further exasperated the falling price. Immediately after Musk’s tweet, the price of Bitcoin dropped by $28,000.
Shortly before Tesla’s divestiture of Bitcoin and elimination of Bitcoin as an acceptable currency to purchase its cars, market analysts announced their belief that Bitcoin was overvalued. Further, they expressed the need for a market correction to lower the price of Bitcoin.
In report format (3-5 pages), respond to the following questions and cite all sources used to develop your responses.
1. The price of Bitcoin moved from $100 to $1,000 during 2013, jumped to $4,000 during the summer of 2017, and shot up to $13,000 by the end of 2017. The next dramatic price increase occurred in March 2021, when the price per Bitcoin approached $59,000.
Research market and economic indicators to identify potential factors other than Musk-Tweets that may have contributed to the volatility in Bitcoin prices and report your findings.
2. Apply Cressey’s Fraud Triangle to explain Elon Musk’s motivation, opportunity, and rationalization for potentially attempting to influence Bitcoin prices using social media.
3. To what extent do you hold Musk responsible for attempting to manipulate a currency market? Be specific and state whether you believe Musk violated any SEC rules.
4. Did Elon Musk commit fraud? Explain the process used to make this determination.