Bitcoin surge raises the question: Is Musk running a ‘pump and dump’ scheme?

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June 16 2021
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The price of bitcoin continues its volatile run as Tesla boss Elon Musk renews his support for the alternative currency, although sceptics have accused the billionaire of trying to pump and dump the currency.

Over the last 24 hours, the price of bitcoin has surged following Mr Musk’s tweets of support.

The series of tweets saw the price of bitcoin peak just shy of US$40,000 ($51,928).

“When there’s confirmation of reasonable (~50 per cent) clean energy usage by miners with positive future trend, Tesla will resume allowing bitcoin transactions,” Mr Musk tweeted Sunday afternoon, US time.

The world’s former richest man, however, did not expand on his comments, failing to elaborate on how the clean energy would be monitored.

Bitcoin slumped to a low of $31,304 on Tuesday but was already recovering, reaching $35,705 shortly before Mr Musk’s latest comment.

“Musk’s words caused bitcoin to surge, from a trading range of sub-US$35,000 ($45,427), which it has tread for the past week, to now over US$39,000,” eToro’s analyst Simon Peters said.

The strong growth in bitcoin’s price has been labelled a ‘pump and dump’ strategy by Magda Wierzycka, head of South African asset manager Sygnia, who used a radio interview last week to accuse Mr Musk of price manipulation.

Appearing on the podcast The Money Show, Ms Wierzycka confirmed that she was previously burnt ‘by the digital gold’ in 2019.

When asked about the fundamentals of the asset class, Ms Wierzycka said it was similar to gold albeit manipulated by Mr Musk.

“[Like gold] it is a completely useless entity, but it has become a store of value. I think in the case of bitcoin, it is a similar thing.”

“But the volatility we have seen, which is clearly unexpected function of market manipulation by Elon Musk, if it happened to a listed company, he would be investigated and sanctioned by the SEC,” she said.

The investor highlighted Mr Musk’s recent history with the cryptocurrency, pointing to a myriad of ways the Tesla founder has profited – not excluding allowing EV enthusiasts to purchase his cars with bitcoin.

“He offered to accept payments in bitcoin for Tesla and then he proceeded to reverse that and sold a large part of his exposure.”

“So, what we have seen with bitcoin is price manipulation by one very powerful and influential individual,” Ms Wierzycka said.

Mr Musk has strenuously denied any wrongdoing, noting he is still heavily involved with the asset class.

“This is inaccurate. Tesla only sold ~10 per cent of holdings to confirm BTC could be liquidated easily without moving market,” Mr Musk said on Twitter.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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