Twitter. Tittle-tattle or a market influencer?
The following is a guest editorial courtesy of Andrew Saks, Head of Research and Analysis at ETX Capital.
It’s almost unbelievable how just one sentence, written in a totally public forum, can make such a huge difference to the global financial markets these days.
Those who were shocked by the GameStop meme stock crash in January this year perhaps could have seen it coming.
The revolution which is currently taking place in the form of a power shift to the social media communities and forums from various publicly listed companies is extremely empowering, as much as it is disruptive.
Following the same dynamic as the now famous Reddit group whose dialog affected the GameStop stock to the point at which many brokerages were unable to continue pricing any asset class at all, resulting in prolonged platform outages, the use of Twitter by influential technology firm executives and commentators is now having the same effect, only it is doing so in just one sentence, or Tweet, as sentences are now known.
Elon Musk, a man who did not become the wealthiest man in the world by conforming to orthodox views on pretty much anything at all from the naming of children to the method by which cars should be powered and on which galaxy human being should be able to tread foot, has now proven that in sharing just two viewpoints on Twitter, he can create tremendous waves in almost any market.
We’ve all long ago heard of the Elliot Wave. Perhaps we are now entering the era of the Elon Wave!
Remember when, back in August 2018, which is an epoch ago in terms of the incredible twists and turns that the financial markets and their operations have taken since, Mr Musk tweeted that he could turn Tesla into a privately held company with a value of $420 per share?
Well, the US Securities and Exchange Commission (SEC) did not take that lightly at all, and sanctioned him and today it has appeared in the news that the SEC has almost begun distribution of the $40 million paid by Elon Musk and Tesla Inc as part of a settlement with the US financial markets regulator.
Yes, this attempt to influence the markets via a publicly listed company that Mr Musk founded and has executive control over was indeed costly, however he has been at it again.
It is hard to control mavericks and disrupters. Perhaps that is why the boardrooms at many mainstream automobile manufacturers which have been in business for a very long time and are as finely honed as they can be showed no concern when out of the blue, an eccentric from Silicon Valley with absolutely no car industry background introduced his electric cars. They knew that he may make some waves in what is an extremely established industry, but ultimately one call by an executive of the 100-year plus established car companies to the R&D and marketing departments would be enough to produce a better product.
Mr Musk’s ideology is different. It is off-the-wall. It is zany and that of an outright boundary-pusher. He will fail or succeed by his kneejerk inventions.
That’s perhaps what drove him back to the same Twitter account that has given him a platform to make people of all walks of life sit up and pay attention as well as attract regulatory sanctions, whilst at the same time giving him massive celebrity status.
Today, he finds himself in hot water for influencing a 17% crash in the price of Bitcoin, a cryptocurrency that has been experiencing unbelievable values over the past year and a half.
Mr Musk is the opposite of what governments want. He is not the person who will stand where he is told by a Covid marshall. He will not close his business down because a man with a hi-vis vest tells him to. Quite the opposite. He succeeds by thinking beyond the narrative, and that is why he is admired.
Mr Musk therefore would never want to be just a participant in a market, he would want to be a main factor in its rise or fall, and in finding himself once again on the wrong side of the finger-wagging, he has managed to achieve what he thrives on.
The price of the world’s largest cryptocurrency dropped from around $54,819 to $45,700, its lowest since March 1, in just under two hours following the tweet in which he very cleverly associated it, a highly popular cryptocurrency, with another trend of the moment, climate change bandwagonism.
He began by insinuating that Bitcoin mining has hugely negative effects on the climate due to the vast energy resources it requires. He said “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are looking at other cryptocurrencies that use less than 1% of Bitcoin’s energy per transaction.
He also confirmed that Tesla has suspended vehicle purchases using Bitcoin.
This has been issued at a timely point for Mr Musk’s latest influencing of the market, as he is currently portraying himself as “The Dogefather”, a public and very clever turn of phrase to allude to what he considers to be success in trading Dogecoin.
Yes, these are all matters relating to digital assets, but the trend that is worthy of attention here is that the world has moved away from the traditional market sentiment-based methods of judging the fluctuations in value of anything, be it currency or indices.
We clearly live in a world in which any asset, tradeable on or off exchange, is influenceable by simply typing a few words onto a publicly available forum and having your opinion.
As put so simply yet eloquently by an FX industry professional that I have a lot of respect for this week, “It’s all about the hashtags these days”. He wasn’t joking!
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