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Friday, Oct 15, 2021

Musk creates 'hype' with bitcoin ‘pump and dump’ comments

Musk creates 'hype' with bitcoin ‘pump and dump’ comments

The Tesla CEO says he 'might pump,' but doesn't 'dump' the cryptocurrency

Jordan Belfort, the former stockbroker and subject of the 2013 hit "Wolf of Wall Street," weighed in on Tesla CEO Elon Musk’s Bitcoin comment where he said, "I might pump, but I don't dump," arguing that while he may not need to, other people pump and dump around the "hype" the celebrity creates.

"I like Elon Musk and I think he’s rich enough, he doesn’t have to make an extra few dollars pumping and dumping," Belfort, who spent 22 months in prison after pleading guilty to charges of securities fraud and money laundering, told "Varney & Co." on Thursday.

"I think the problem is while he might not be pumping and dumping, people use his endorsement and they pump and dump around the hype that Elon creates."

Belfort made the comment one day after Musk said the "three meaningful assets" he personally owns besides his two companies are Bitcoin, Dogecoin and Ethereum.

"If the price of bitcoin goes down, I lose money," Musk said during the discussion hosted on a website for a "Bitcoin-focused initiative" called "The B Word" on Tuesday, along with Twitter CEO Jack Dorsey and Ark Invest CEO Cathie Wood. "I might pump but I don’t dump."

He also said Tesla and SpaceX own bitcoin during the cryptocurrency-themed discussion, which was hosted by the Crypto Council for Innovation, which touts itself as "a global alliance of crypto industry leaders."

The price of ethereum rose above $2,000 upon the billionaire's Tuesday announcement, according to Coindesk data. Bitcoin, Dogecoin, Ripple, Cardano and most other cryptocurrencies were also up across the board Tuesday following Musk’s comments.

When asked why he's such a big fan of Dogecoin – a cryptocurrency based on a popular meme as a joke in 2013 – Musk said he likes dogs, memes and the fact that Dogecoin "doesn't take itself too seriously." He explained later that he believes some of the most unlikely investments end up becoming the most profitable.

In April of this year, Dogecoin saw a more than 500% price surge due in part to attention from Musk, making Dogecoin a household name – for crypto investors, at least.

Belfort brought up Dogecoin as an example of where Musk was "probably inadvertently being used" to pump and dump the cryptocurrency.

Critics accused Musk of manipulating the market through his praise and criticism of Bitcoin, as well as his unwavering support for Dogecoin, which started as a joke but has since gained immense pop.


Tesla announced in February that it was acquiring $1.5 billion worth of the cryptocurrency and would accept it as payment. In May, Musk later backtracked on the decision, saying the crypto's use of energy was a threat to climate change and the automaker would no longer accept it as payment.

However, during Wednesday’s conference, Musk said Tesla will most likely restart accepting bitcoin as payments once it investigates the amount of renewable energy used to mine the digital currency, Reuters reported.

Also in May, the China Banking Association warned members of risks associated with digital currencies.

Bitcoin and other cryptocurrencies tanked that month with the largest market value of the group falling to the $30,000 level, dropping from its record $64,000 reached earlier this year.

Bitcoin was trading at about $32,400, as of Thursday afternoon, following the most popular cryptocurrency’s drop below the $30,000 mark two days before for the first time in a month.

Belfort told host Stuart Varney on Thursday that he is a cryptocurrency investor as well and is "in it for the long-term." He noted that some of his positions include investments in Bitcoin and Ethereum.

He also noted that he wouldn’t "put in any more than I could afford to lose."

Belfort said he hopes the price of bitcoin drops again because he "would buy more if it drops down more."

"I would love it to go lower because I’m a long-term investor so I don’t care if it goes up or down in the short-term," he told Varney.

"I would love it to go back to 5,000 [BTC] and buy a ton of it there and that would be a great thing."

He added that it’s "very dangerous" for those who "are trading bitcoin for the short-term," especially given how "volatile" the cryptocurrency can be.

"Anyone that says they know where it’s going next is lying," Belfort said. "No one knows where it’s going next."

He pointed out that the price of bitcoin is "susceptible to things like statements from Elon Musk, things that happen in China [and] other parts of the world."

Bitcoin and other cryptocurrencies remain unregulated within the U.S. financial system. The euphoria surrounding cryptocurrencies at the start of the year has been impacted by increased talk of regulation around the globe, which has weighed on bitcoin's price.

Belfort admitted that he has always been "scared of Bitcoin" because of all the uncertainty surrounding the cryptocurrency.

"Right now who knows what the U.S. is going to say with taxes, with regulation, is it a security, is it not and those are huge risks," Belfort went on to say.

"It’s still a nascent market until it really finds a footing," Belfort noted, adding that once cryptocurrencies are regulated "and the sovereign risk is more well-known," then analysts will "be able to start predicting it much more systematically."

He then pointed out that he believes the industry is "far enough along now, that I think the chances are far better than not that it stays with us and they don’t try to regulate it out of business."

He then stressed that he believes what is holding down the price of bitcoin and other cryptocurrencies is all the "uncertainty on the regulatory front."

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