Elon Musk Tanks Bitcoin, is the Bull Market Really Over?

Everyone is suddenly wondering if the bull cycle is over after a series of erratic Elon Musk tweets that sent the markets into sheer panic.

Bitcoin pulled back a whopping 35%, and the greater crypto markets as a whole are down.

Does Elon Musk really have that much power over the markets, or was there something else at play that caused the extreme volatility and the biggest pullback since March 2020?

Volatility can be scary if you don’t have a risk-managed exposure strategy to protect against downside risk.

When analyzing markets, there’s always more to the story than what meets the eye – Underlying fundamentals are constantly shifting, and correlation is not always causation.

Oftentimes it’s a series of events that intersect and lead to price action like this.

Let’s review comments from Elon Musk alongside data points to answer the question – Is the Bull Market Really Over?

A Brief History of Elon Musk and Bitcoin


Elon Musk has a history of flirting with crypto Twitter dating all the way back to November 27th, 2017.

When you take the time to review his Tweets, it’s easy to come to the conclusion that Elon Musk is manipulating the market and pumping his own bags.

The Myth of Money newsletter does an excellent job compiling all those tweets here that goes all the way back to the beginning of Musk’s crypto journey.

However, this article will mostly focus on 2021 and the events of the last week.

It wasn’t long ago that Elon Musk was the hero of Bitcoin due to a $1.5B purchase for Tesla’s balance sheet. 

Surely one of the smartest, richest, most powerful people in the world buying Bitcoin legitimized it as an inflation hedge and treasury reserve asset.

Elon would go on to add #Bitcoin to his Twitter bio and claim that it was “on the verge of getting broad acceptance” and that he was “a little slow on the uptake.” Soon thereafter, Bitcoin started to become an important part of institutional investor portfolios and a treasury reserve asset in a world of rampant inflation.

The Twitter verse celebrated with laser eyes and claims that prices were headed “to the moon.”

After adding Bitcoin to Tesla’s balance sheet, Musk would begin pumping Dogecoin, a coin with little to no development activity that was created as a joke during the early days of crypto.

This all led to an epic Dogecoin run that peaked at $.73 when Elon went on SNL and immediately dumped during and after.

Elon’s erratic behavior and market manipulation wouldn’t end there.

Elon Rug Pulls Bitcoin and Sends the Market into Panic


The aftermath of Musk’s Twitter pump left most maximalists wondering what was next, eagerly awaiting an onslaught of new corporate adoptions that would ultimately never manifest, as price action moved mostly sideways since the Feb 8th announcement.

Bitcoin looked weak, but most participants considered this a consolidation phase preempting the next move higher. Meanwhile, the likes of ETH and the altcoin market would make a historic run while eating into Bitcoin dominance along the way.

To sum it up, Bitcoin went sideways and consolidated for 100 days while the rest of the market saw exponential returns.

During this time, Elon’s Dogecoin tweets accelerated and culminated with a poll about whether or not Tesla should accept Doge.

That’s when things got really weird, and Elon Musk suddenly decided that Bitcoin was not good for the environment and that Tesla would no longer accept it to purchase their electric vehicles. At this point, no one is interested in using their Bitcoin as a currency as it morphs into gold 2.0.



It’s hard to fathom that Elon Musk and Tesla, whose entire brand revolves around energy efficiency, didn’t do their due diligence upfront on the environmental impact of Bitcoin before adding it to their treasury reserves.



It’s a true head-scratcher from someone who’s generally considered a hyper-intelligent entrepreneurial leader.

Shortly thereafter, It was then revealed that Elon is working with Dogecoin developers to improve system transaction and efficiency – Something he has been doing since 2019.

The peculiar thing is that doge only has 4 core developers – Bitcoin has 300+ while Ethereum has 2,000+ by comparison. Scaling a blockchain to become faster and more efficient takes a lot of engineering power to pull off.

It’s next to impossible to scale a blockchain with only 4 part-time developers.

If that doesn’t hint at market manipulation, I don’t know what else could, but Musk didn’t stop there. He decided to troll Bitcoin and the crypto world, which would become a catalyst to a major pullback.

He implies he will sell his Bitcoin in one Tweet and then later implies in another tweet that no Bitcoin has been sold.

Keep in mind that during this tweetstorm, Elon not only caused massive volatility for the crypto market but also for Teslas Bitcoin holdings.

Billions of dollars were wiped from the markets, and most are blaming Elon Musk. No one would be surprised if Elon Musk bought the dip, and it’s hard to argue that he wasn’t at least partially responsible for the current pullback.

Everything is on the table with Elon Musk at the helm.

However, let’s take a closer look at some other data points, and you’ll soon realize there’s more to this story than meets the eye.

The Underlying Fundamentals Haven’t Changed.


Elon Musk no doubt has the power to affect both the stock market and the crypto market. 

However, when you zoom out, the landscape is healthier than ever before.

The likes of Paypal, BNY Mellon, Goldman Sachs, JPMorgan Chase & Co, Morgan Stanely, Square, Palantir, and Andressen Horowitz are all investing in Bitcoin, Ethereum, and other Digital Assets.

A series of erratic Elon Musk Tweets isn’t going to change their long-term investment strategy in and offering products around digital assets.

Institutional interest in digital assets will only ramp up from here. Just today, Sony filed a patent for a service that accepts Bitcoin for in-game payments.

Institutional interest is rising, and this isn’t going to change anytime soon.

We’re also still in the middle of an inflation cycle with historic levels of money printing by governments around the world. The dollar is losing value, and the thesis to invest in digital assets like Bitcoin and Ethereum has never been greater.

Is The Bull Market Over?


Our Chief Investment Officer Nathan Cox, a 20 year veteran of options trading, sure doesn’t seem to think so.

“Watch 10-year yields, inflation numbers, equity markets. They are the real story, and crypto is paying the price in the short term. ETH was way overbought, and BTC has been out of favor, consolidating for over 100 days, and now with markets coming down, everyone gets a little spooked and goes risk-off.

He goes on to explain the emotional aspect of investing.

“Pullbacks always feel like this. and it’s impossible to say if this is “the one” or not. But based on the numbers, I seriously doubt it. The funding rate is mid-range, with lots of room left on S2F, open interest is still projecting much higher. People tend to forget that these markets are relatively volatile. So 30% swings are part of the reality. if you go up 100% in 20 days, be prepared to give some of that back.”

In regards to Elon’s Twitter antics.

“I was on a Twitter radio thing earlier today where they covered this and basically got to the point that Elon has been highly manipulative but ultimately shot himself in the foot with these types of comments. In the grand scheme, $1.5 billion in BTC isn’t that much; it was always a headline. The underlying narrative hasn’t changed, and focusing on Elon is a distraction from the larger story.”

On-Chain Metrics Show Bull Market Still on Schedule


According to on-chain data, we’re still in a bull market and haven’t peaked yet. Let’s review a series of charts from Glassnode for both Bitcoin and Ethereum. However, keep in mind some of the charts are only available for Bitcoin.

But since Bitcoin is still considered the king by many until further notice, that will still give us a good indication of the market’s overall health.

BTC and ETH – Futures Perpetual Funding Rate – All Exchanges


Bitcoin and Ethereum perpetual funding rate

When Futures Perpetual Funding Rate is high, people are willing to pay more to go long. 

In this case, many people were willing to pay more to go long, signaling an overextended market with too many longs and not enough shorts. 

For every winning trade, there are losers on the other side. With so many people long and willing to pay more, it’s a contrarian indicator that the markets are overextended.

When it starts declining, it’s an indicator that the market is returning to equilibrium.

BTC and ETH – Net Unrealized Profit/Loss (NUPL)


The above metrics indicate Bitcoin market cycles and show investor sentiment at different stages of market cycles. We are currently in the belief–denial phase and have yet to enter euphoria – greed, which would indicate a market top.

Currently, more than 50% of all coins are in profit right now. As this goes higher, it indicates the market is overextended, and there are a lot of unrealized gains. 

While Ethereum has many great things happening in its ecosystem, it was especially overbought and was overdue for a pullback.

The above image shows all the previous post halving cycles for Bitcoin. As you can see, we’re in the belief – denial phase and just beginning to knock on the door of euphoria – greed phase.

BTC – Futures Long and Short Liquidations (Total) – All Exchanges


Bitcoin Futures Long Liquidations

The above chart shows the number of longs and shorts liquidated. That huge spike on April 18th, 2021, was traders getting washed out and liquidated to the tune of $1.8B. As the price goes down, more people get liquidated.

The interesting point to make regarding this chart is that there weren’t many liquidations during this major pullback which means not many people were leveraged long.

In other words, there’s a very high likelihood that the price will find support in this area and bounce, which is indicative of a healthier market.

The same can be said of ETH – Not many liquidations mean less leverage and a healthier market. Another way to look at this pullback is that people need margin relief for other leveraged accounts.

Crypto doesn’t exist in a vacuum – Investors have exposure to equities and crypto and will sell assets in higher profit to satisfy accounts in margin.

Bitcoin and Ethereum are in a much higher profit than equities right now, so it’s only natural that they will sell those assets first.

Bitcoin: Reserve Risk


bitcoin reserve risk chart

Reserve Risk is defined as price/HODL Bank and is used to assess the confidence of long-term hodlers relative to the price of Bitcoin. When confidence is high, and the price is low, there is an attractive risk/reward to invest. When confidence is low and the price is high, then risk/reward is unattractive at the time.

This is an indication that predicts how overbought the market is – As reserve risk (orange) inches upwards towards red; the market becomes overbought.

As it moves into the green, it’s oversold. If the reserve risk band is in red, that means we’ve hit the market top. In this case, we haven’t hit the market top yet.

This chart currently only exists for Bitcoin and not Ethereum. However, I would suspect that ETH looks similar to BTC considering The Rise of Institutional Ethereum Investors.

Bitcoin: Realized Price


bitcoin realized price chart

To put it simply, when the gray line is above the orange line, we’re overbought, and when the orange is below the gray line, we’re oversold.

However, it’s important to note that during a bull market, gray stays above orange, and when we hit a bear, orange stays under gray.

This is more of a long-term metric and shows we’re still in the hype phase of the bull market.

Ethereum is currently showing the same thing – gray is above blue, which means we’re still in the price phase and haven’t begun to drift lower towards blue.

Bitcoin: Stock-to-Flow


bitcoin stock to flow chart


This is a chart of the famous Bitcoin Stock-to-Flow model. The dotted gray lines show each halving. The color of the line determines what part of the cycle we’re in. 

Bitcoin will go above and below the darker gray line – When it goes below, Bitcoin is undervalued/oversold, and when it goes above, it’s overvalued/oversold.

We’re currently underneath it, and it isn’t near the peak, which would be a lighter green color on the chart.

Bitcoin: Stock-to-Flow Deflection


This shows the ratio between the current Bitcoin price and the S/F model. If deflection is greater than 1, we’re overvalued and less than 1, undervalued.

In this case, Bitcoin poked its head above 1 and pulled back and currently sits at around 0.5 in the green zone.

The redder it becomes, the closer we are to the end of the bull market. The other interesting thing to note is that if you draw a trendline, it shows how volatility is dropping over time which is a signal of a maturing market with more capital and institutional interest.

What’s Next?


While it may be unnerving that someone like Elon Musk can wield so much power with his Tweets, he wasn’t the only reason why the markets pulled back. All the indicators were signaling a pullback was imminent.

However, we can see that according to the above on-chain data, the bull market marches on despite Elon Musk’s best attempts to derail it. Musk was a catalyst but not the main reason why Bitcoin and Ethereum pulled back.

With increasing institutional interest in both Bitcoin and Ethereum, and as volatility continues its downward trend, Tweets from an erratic billionaire will no longer send the markets into a tailspin.