Tesla founder Elon Musk has purchased the social media service Twitter. What effect will this unprecedented move have on the crypto market?
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Industry welcomes Elon Musk’s Twitter purchase
On April 25, Elon Musk acquired Twitter for $54.20 per share, totaling $44 billion. The agreement was reached after a tense tug of war with existing shareholders and the purchase price amounts to a 38% premium over Twitter’s share price this month.
Earlier this month, Musk caught the world’s attention by announcing that he held 9.2% of Twitter (amounting to $2.98 billion) and that he would acquire the remaining shares in a hostile takeover funded by loans backed by Tesla stock and borrowings from financial institutions. Twitter’s owners stated their intent to defend themselves through a poison pill (offering share purchase rights below market rate to existing shareholders), but in the end the board of directors unanimously decided to approve the purchase. This major deal concluded three weeks of intense arguments following the news of Musk’s shareholding announcement.
The transaction is expected to be finalized after obtaining approval from Twitter’s board and regulatory authorities. Bret Taylor, Twitter’s independent board chair said “The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”
The crypto market reacted favorably to the acquisition. Jack Dorsey, Twitter co-founder and CEO of Block (formerly Square) said Musk is the “singular solution I trust” to run the company. “I trust his mission to extend the light of consciousness,” he said. “In principle, I don’t believe anyone should own or run Twitter,” he added. “It wants to be a public good at a protocol level, not a company.” Ethereum founder Vitalik Buterin expressed his view that Elon Musk running Twitter would be preferable to the company’s status quo or to it being acquired by a major corporation.
Will Twitter buy Bitcoin?
Elon Musk is known as one of the leading pro-crypto figures. So, if he buys Twitter, what effect will this have on the crypto market?
First, there is a possibility that Twitter’s financial assets will include Bitcoin. Among cryptocurrencies, Elon Musk is a particularly strong supporter of Bitcoin. Then there is the scenario that Twitter can bring together crypto industry leaders and users by becoming a favorite channel for both. For example, in February, Musk earned his pro-crypto reputation by tweeting about the process of buying $1.5 billion in Bitcoin. In March, he also temporarily allowed buying Tesla vehicles with Bitcoin.
This opens the possibility that as with Tesla, Twitter might buy Bitcoin as a financial asset. The fact that the Bitcoin price rose right after the Twitter purchase news hit demonstrates the market’s expectations. For example, GlobalBlock analyst Marcos Sotiriou said he thought it was likely that Musk would integrate crypto payments on Twitter in some way.
However, some also object that the chance of this actually happening is slim. Strahinja Savic, head of data and analytics at crypto derivatives firm FRNT Financial, told Barron’s: “Given Twitter’s visibility in U.S. politics and culture, the company acquiring Bitcoin to hold on its balance sheet would be a big deal”, adding that from a market standpoint, scooping up possibly billions of dollars’ worth of Bitcoin could also have an impact on prices.
Dogecoin introduction? … Negative for Web3, NFT
With his acquisition of Twitter, it is possible that Musk will allow his preferred cryptocurrency, Dogecoin, as a payment method for Tesla. This possibility is being raised because Musk included this fact in the massive Twitter reform plan he presented when he became the majority shareholder of Twitter. On April 10th, he mentioned adding Dogecoin payment options while presenting his ad-free media initiative for Twitter.
Dogecoin started as a joke cryptocurrency in 2013 using the popular Shiba meme as its motif, but thanks in part to Musk’s support, the cryptocurrency rose to the top 10 by market capitalization. Dogecoin is a cryptocurrency that has been criticized as rising only due to the Musk effect while lacking any commercial value. In fact, after the announcement of the Twitter purchase, Dogecoin soared by 30%, but after the news effect subsided, it gave up most of its gains again.
Dogecoin developer Billy Markus wrote on Reddit in 2021 that “Dogecoin was created for idiots. […] It’s a cryptocurrency that was thrown out there without any expectation or plan. It took about 3 hours to make”. Musk took a liking to Dogecoin years ago and started to tweet about the cryptocurrency in 2019. He’s claimed to have worked with Dogecoin developers on bettering its network and has attributed his support of it to feeling that it’s the “people’s crypto.”
Musk is known to be positive on crypto, but negative on Web3 and NFT. When Twitter made it possible to configure one’s Twitter user profile as an NFT last January, Musk publicly criticized the move, calling it “annoying”. “Twitter is wasting its engineering power on this nonsense while cryptocurrency scammers are partying,” he tweeted