A few years ago, many considered Elon Musk to be a crypto hero. However, their relationship has deteriorated, and these days he rarely talks about Bitcoin or cryptocurrencies. He broke his silence at the recent X Takeover conference, only saying that he won't be seen promoting cryptocurrencies.
Still, Musk's Tesla still holds large amounts of Bitcoin. And when that Bitcoin starts moving on the blockchain, people start to worry. If you're considering buying Bitcoin or already own Bitcoin, know that these major investors can have a big impact on your investment. Some even accuse them (not Tesla) of market manipulation.
How Tesla surprised the market
Tesla holds over 11,500 BTC, valued at just over $775 million. When Tesla recently transferred all its holdings, investors worried that the company was preparing to sell. Until then, he had not touched his funds for two years.
Arcam Intelligence, a company specializing in blockchain anonymization, noticed Tesla's move. A week later, a company analyst posted on social media that the funds had simply been moved to another Tesla wallet.
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. According to the Bitcoin Treasury, Tesla is the fourth largest U.S. company in terms of Bitcoin holdings.
There are many possible reasons why Tesla would move cryptocurrencies. It could be a simple reorganization of the company's wallet. Still, there are good reasons for investors to be nervous. Tesla has a history of unintentionally causing the price of Bitcoin to plummet.
- Back in 2021, Tesla bought a large amount of Topcoin and announced that it would accept BTC as a payment method, pushing Bitcoin to new highs.
- A few months later, Tesla withdrew BTC, saying it could not accept it due to environmental concerns, and the price fell by 10%.
- Tesla sold 75% of its holdings through the summer of 2022, according to its second-quarter earnings report.
Protect yourself from market manipulation
If you’re going to swim in the crypto ocean, you need to swim with the whales. In most cases, whales are not intentionally manipulating the market. The actions of whales can easily change the flow of virtual currency. Look out for companies like Arkham on social media. By knowing what whales are doing, you can minimize the risk of getting caught in a wake.
There are other forms of market manipulation that are more deliberate and egregious. These include wash trading, pump-and-dump schemes, price fraud, and more. they are illegal. In fact, the SEC recently charged 18 people and companies with wash trading, which uses fake trades to inflate prices.
Research is your first line of defense against many forms of fraud and manipulation, especially when investing in smaller altcoins. It is also important to use a reliable crypto platform.
For example, Robinhood is a cryptocurrency broker with a high reputation for security. Click here to learn more about how Robinhood keeps crypto investors safe and opens an account..
What it means for investors
We often talk about risks such as volatility, regulatory change, and technological uncertainty. But there are other risks as well. Cryptocurrency is still a relatively new industry, which means the major players can have a huge impact on prices. Investor protection is also limited, giving bad actors more freedom to act.
The past few weeks have been a good example of why you should pay attention to crypto whales. Tesla still holds enough BTC to move the market. To be clear, I am not convinced that Tesla is trying to manipulate the price of Bitcoin. However, it is alarming that one whale's internal wallet reorganization can cause anxiety in the entire market. And while Elon Musk may say he's done talking about cryptocurrencies, whispering the word “Dogecoin” is enough to send prices skyrocketing.
If you want to buy cryptocurrencies, try to understand and manage as many risks as possible. Researching your investments carefully and paying attention to social media are powerful ways to protect yourself. It is also important to only invest funds that you can afford to lose and to use a reliable virtual currency exchange or securities company. Investing in cryptocurrencies is never risk-free, but there are ways to reduce the risk.
