A few years ago, many viewed Elon Musk as a crypto hero. But that relationship has soured and these days he barely speaks about Bitcoin or cryptocurrency at all. He broke his silence at a recent X Takeover conference, but only to say you won’t see him promoting crypto.
Even so, Musk’s Tesla still holds significant amounts of Bitcoin. And when that Bitcoin starts to move around on the blockchain, people start to worry. If you’re considering buying Bitcoin — or you already hold it — know that these major investors can have a significant influence on your investments. So much so that some accuse them (not Tesla) of market manipulation and more.
How Tesla just spooked the markets
Tesla holds over 11,500 BTC, worth just over $775 million. When it moved the entirety of its holdings recently, investors got worried Tesla might be getting ready to make a sale. Up until then, it hadn’t touched the funds for two years.
Arkham Intelligence — a firm that specializes in deanonymizing the blockchain — noticed that Tesla had made the move. A week later, its analysts posted on social media that the funds had only been moved to other Tesla wallets.
Tesla owns about 0.06% of the total BTC in circulation, making it one of many so-called Bitcoin “whales.” Whales are investors whose actions can have a significant impact on the market. Tesla is the fourth-biggest U.S. company in terms of its Bitcoin holdings, according to Bitcoin Treasuries.
There could be any number of reasons for Tesla to move its crypto around. It could be a simple reorganization of the company’s wallets. Even so, investors have good reason to be nervous. Tesla has a history of unintentionally tanking Bitcoin’s price.
- Back in 2021, Tesla pushed Bitcoin to a new high when it announced it had bought large amounts of the top coin and would accept BTC as a form of payment.
- Months later, the price fell 10% when Tesla backtracked, saying it could not accept BTC because of environmental concerns.
- By the summer of 2022, Tesla had sold 75% of its holdings, according to its Q2 earnings report.
Protecting yourself against market manipulation
If you’re going to swim in crypto waters, you have to swim with the whales. In most cases, whales aren’t deliberately manipulating markets — it’s just that their actions can all too easily shift the crypto currents. Pay attention to firms like Arkham on social media. Knowing what whales are doing can minimize the risk of getting caught in their slipstreams.
There are other more deliberate and pernicious forms of market manipulation. They include wash trading, pump-and-dump schemes, and price spoofing. They are illegal. Indeed, the SEC recently brought charges against 18 people and companies for wash trading, which is where people essentially use fake trades to push prices up.
Research is your first line of defense against many forms of fraud and manipulation, particularly when investing in smaller altcoins. It’s also important to use a reliable and trustworthy crypto platform.
For example, Robinhood is a crypto broker with a strong reputation for security. Click here to learn more about how Robinhood keeps crypto investors safe and open an account.
What it means for investors
We talk a lot about risks like volatility, shifting regulations, and technological uncertainty. But there are other risks, too. Crypto is still a relatively new industry and that means key players can have an outsized impact on prices. There’s also limited investor protection, which gives bad actors more scope to maneuver.
Recent weeks are a good illustration of why crypto whales need to be on your radar: Tesla still holds enough BTC to move markets. For clarity, I am sure Tesla is not attempting to manipulate Bitcoin’s price. But it is worrying when a single whale’s internal wallet reorganization sends jitters through the whole market. And Elon Musk may say he’s done talking about crypto, but he only needs to whisper the word “Dogecoin” to send its price soaring.
If you want to buy cryptocurrency, try to understand and manage as many risks as you can. Researching investments carefully and paying attention to social media is a powerful way to protect yourself. It’s also important to only invest money you can afford to lose and use reputable crypto exchanges and brokerages. Investing in crypto will never be risk free, but there are ways to make it less risky.