Market Wrap readers, Hello! During the final two weeks of 2021, we’re going to recap the year’s most dramatic moments in cryptocurrency markets. We would like to highlight key lessons from this fast-evolving corner of global finance. We’re recapping what shook crypto markets this year.
On Monday, we recounted how even bitcoin staged a powerful price rally to the start of the year. Some institutional investors began to question the sustainability of the trend. Today, we’ll show you how, during January and February, coordination. And posts on social media-fueled even more demand for bitcoin and other cryptocurrencies, delaying an immediate price correction.
As Bitcoin (BTC) skyrocketed in February, social media, particularly Twitter. Appeared to take on an expanded role in cryptocurrency markets. With prices pumping up in response to tweet after tweet. It became clear that investor appetite for risk remained strong despite earlier concerns about rampant speculation.
Tesla CEO Elon Musk and then-Twitter CEO Jack Dorsey tweeted away. To push bitcoin higher from $40,000 in January to nearly $57,000 in February. The viral effects of social media pushed retail traders into full-on buy mode. With bones thrown to the doggy-themed joke token dogecoin (DOGE) that added billions of dollars to that cryptocurrency’s market value.
More updates on the market year end wrap
On social media, some traders banded together in an effort to keep crypto prices elevated. Similar to the way retail traders in traditional markets had coordinated to roil stocks like GameStop.
As an example, Musk, ranked by Forbes as the world’s richest person, added the #Bitcoin hashtag to his Twitter profile, contributing to an immediate 11% BTC price hike. Shortly afterward, Jack Dorsey also added the #Bitcoin hashtag to his Twitter profile.
The bitcoin endorsements by Musk and Dorsey went viral. As a result, inspiring leagues of traders who dismissed the cautionary warnings of more experienced investors. It all seemed like a lot of fun. And bitcoin was not the only cryptocurrency to advance.
Musk also suggested in a tweet that dogecoin might be “the future currency of earth.” Musk’s involvement in the dog token tribe helped send DOGE mooooning (his word), along with other alternative cryptocurrencies.
Such hijinks kept the crypto party going. Here’s a look at relative performance in April to July; DOGE vastly outperformed bitcoin from April to July of this year, as shown below:
How could one man cause such a massive move in crypto markets? As CoinDesk’s Edward Oosterbaan explained earlier this month how Musk’s star power was able to sway the price of BTC and DOGE.
“Musk is far from the only person to move the crypto market for no apparent reason other than making an endorsement,” Oosterbaan continues. “A sizable portion of the industry from meme coins to NFTs has proven to be highly responsive to celebrity shilling.”
“High-profile celebrities and Twitter accounts sowing FOMO (fear of missing out) is likely here to stay. The power of social media on the crypto market. Is a testament to the general public. About its lack of regulation and maturity, and the inherent liquidity of 24/7, permissionless assets.”
The chart below tracks Musk’s influence on the DOGE price over time, using data from TradingView.
During bitcoin’s swift ascension in January and February, retail traders used social media as a gateway to discover new alternative cryptocurrencies and react to market sentiment in real-time.
In just a few tweets, Musk and other popular figures were able to pump and dump coins, leading to significant price gains and losses.
The lesson of this ever-so-bizarre stretch of crypto markets history is that social media was, and still is, a force that’s impossible for traders to ignore.