Elon Musk, owner of Tesla, SpaceX, OpenAI, Neuralink, and The Boring Company is well known for his fascination, or shall we call it a love-hate relationship with cryptocurrency. In this rocky relationship, Musk has expressed his love for cryptocurrencies, endorsed them, and then decided they are incongruent with his passion for environmental sustainability. Like anyone truly in love, Musk couldn’t keep his feelings to himself. How could he with 55+ million Twitter followers!
When Musk tweeted bitcoin was “probably a good thing” followers wondered if he was the anonymous founder of Bitcoin, which he denied. Some years later, Musk tweeted Tesla invested over one billion in Bitcoin and would accept Bitcoin for the purchase of its much sought-after electric cars. This drove the price of Bitcoin to an all-time high price of $58,000. The Bitcoin price curve continued to slope upward until Musk’s tweet announcing Tesla sold 10% of its Bitcoin holdings, thus pushing Bitcoin prices down.
In May 2021, Elon Musk informed his 55+ million Twitter followers that Tesla would no longer accept Bitcoin for the purchase of its cars, which further exasperated the falling price. Immediately after Musk’s tweet, the price of Bitcoin dropped by $28,000.
Shortly before Tesla’s divestiture of Bitcoin and elimination of Bitcoin as an acceptable currency to purchase its cars, market analysts announced their belief that Bitcoin was overvalued. Further, they expressed the need for a market correction to lower the price of Bitcoin.
In report format (3-5 pages), respond to the following questions and cite all sources used to develop your responses.
- The price of Bitcoin moved from $100 to $1,000 during 2013, jumped to $4,000 during the summer of 2017, and shot up to $13,000 by the end of 2017. The next dramatic price increase occurred in March 2021, when the price per Bitcoin approached $59,000.
Research market and economic indicators to identify potential factors other than Musk-Tweets that may have contributed to the volatility in Bitcoin prices and report your findings.
- Apply Cressey’s Fraud Triangle to explain Elon Musk’s motivation, opportunity, and rationalization for potentially attempting to influence Bitcoin prices using social media.
- To what extent do you hold Musk responsible for attempting to manipulate a currency market? Be specific and state whether you believe Musk violated any SEC rules.
- Did Elon Musk commit fraud? Explain the process used to make this determination.
Full Answer Section
Opportunity:
Musk has the opportunity to influence Bitcoin prices using social media. He has a large following on Twitter and other social media platforms. His tweets can have a significant impact on the cryptocurrency market.
Rationalization:
Musk could rationalize his behavior by convincing himself that he is helping to promote Bitcoin and other cryptocurrencies. He could also argue that he is simply expressing his personal opinions about Bitcoin.
Is it likely that Musk is attempting to influence Bitcoin prices using social media?
It is difficult to say for sure whether or not Musk is attempting to influence Bitcoin prices using social media. However, the fact that he has a financial motivation, the opportunity, and the ability to rationalize his behavior suggests that it is possible.
What are the ethical implications of Musk's potential attempts to influence Bitcoin prices?
If Musk is attempting to influence Bitcoin prices using social media, this raises a number of ethical concerns. First, it could be seen as a form of manipulation. Musk is using his platform and influence to try to sway the market in his favor. Second, it could create a conflict of interest. Musk is a major investor in Bitcoin, so he has a personal financial interest in the outcome of his tweets. Third, it could lead to losses for investors who are not aware of Musk's potential influence.
Conclusion
It is important to note that there is no evidence that Musk is actually attempting to influence Bitcoin prices using social media. However, the fact that he has a financial motivation, the opportunity, and the ability to rationalize his behavior suggests that it is possible. If Musk is attempting to influence Bitcoin prices, this raises a number of ethical concerns.
Sample Answer
Cressey's Fraud Triangle is a theory of fraud that suggests that fraud occurs when three factors are present:
- Motivation: The perpetrator has a financial or personal need to commit fraud.
- Opportunity: The perpetrator has the opportunity to commit fraud without being detected.
- Rationalization: The perpetrator rationalizes their fraudulent behavior, convincing themselves that it is justified or not really wrong.
Applying Cressey's Fraud Triangle to Elon Musk's potential attempts to influence Bitcoin prices using social media:
Motivation:
Elon Musk has a financial motivation to influence Bitcoin prices. He is a major investor in Bitcoin and other cryptocurrencies. By influencing Bitcoin prices, he could potentially increase the value of his investments.