Elon Musk, the world’s richest man, recently updated his Twitter status to the simple hashtag #Bitcoin, sending the cryptocurrency into a rally that added 20% to its value within minutes. Soon after, Musk sent out a follow-up tweet to his 43.7 million followers, stating “In retrospect, it was inevitable.”
The tweet is presumed to indicate that Musk has finally bought some Bitcoin, something many have speculated about due to his hints of support for the asset. However, this is the first time he has specifically and publically endorsed it in such a way, confirming many of his fan’s feelings.
The huge and sudden gains were almost equivalent to all the previous gains the coin has made earlier this year when it jumped to $42,000 in the first week of January. However, in recent weeks, Bitcoin’s price has slid back down, briefly dipping below $30,000 before climbing to around $32,000 earlier this week. Upon the news of Musk updating his Twitter profile, Bitcoin jumped to near $38,000 within hours, adding a huge $6,000 to its price but has since corrected back to around $35,000.
During the rally, Bitcoin’s trading volume increased by $20 billion and continued to grow during the correction, indicating excessive sell-offs in conjunction with the buying power. The sudden explosive rally liquidated approximately $350 million worth of Bitcoin shorts and a further $120 million of longs on the worth back down. Volume has now retracted back down to the level it was at prior to the tweet and volatility has settled.
Gamestop (GME) Short Squeeze
Musk also put his two cents in on the Reddit-driven GameStop (GME) rally that has dominated the news recently. On Tuesday he posted a tweet that just read “Gamestonk!”, including a link to a Reddit channel called r/WallStreetBets. The channel is populated with retail traders who use platforms like Robinhood to mass buy stocks that hedge funds have put large shorts on. The tactic, known as a short squeeze, forces the hedge funds to increase their positions in a battle to see who runs out of capital first.