On Monday, we recounted how even as 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 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) soared in February, social media, particularly Twitter, appeared to take on an expanded role in cryptocurrency markets, with prices pumping 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.
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.
For 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 rally. Shortly afterward, Jack Dorsey also added the #Bitcoin hashtag to his Twitter profile.
The bitcoin endorsements by Musk and Dorsey went viral, inspiring a league 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 mooning (his word), along with other alternative cryptocurrenciessVersion
Such hijinks kept the crypto party going. Here’s a look at relative performance in January; DOGE vastly outperformed bitcoin in January, as shown below:
How could one man cause such a massive move in crypto markets? CoinDesk’s Edward Oosterbaan explained earlier this month how Musk’s star power was able to sway the price of BTC and DOGE. (Spoiler alert: None of this is all that deep.)
“Musk is far from the only person to move the crypto market for no apparent reason other than making an endorsement,” Oosterbaan wrote. “A sizable portion of the industry from meme coins to NFTs has proven to be highly responsive to celebrity shilling.”
Oosterbaan continued: “High-profile celebrities and Twitter accounts sowing FOMO (fear of missing out) are likely here to stay. The power of social media in the crypto market is testament to the general 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 ascent 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.
