If you merely glance at the financial news once each week, you've no doubt heard about the so-called Elon Musk effect. Who is this influential person and what is the nature of this effect?

Plus, is the phenomenon real or is it just a clever way to lure readers to news sites? In fact, if you're aware of who Musk is and what he does, you're already halfway prepared to estimate the true significance of his public statements and actions.

Elon Musk

Musk is the co-founder of Tesla Motors, the world's premier electric automaker. He's also the founder and owner of SpaceX, a private aerospace company and the first non-government entity to put rockets in orbit.

Before Tesla, Musk build, ran, and then sold a highly successful online payment processing company called PayPal. In short, just about everything the man has put his mind to has done very well.

That's why millions of investors and technical folks look to his investment activity and public pronouncements as guidelines for their own personal financial decisions. Consider that fact that Elon Musk has nearly 50 million followers on social media messaging site Twitter.

Cryptocurrency and the Musk Effect

Given his massive personal following and accepted status as an expert in several fields, Musk's preference for cryptocurrency has been a big boost for both the price and widespread acceptance of alternative forms of money, primarily Bitcoin but also other top players in the space, like Litecoin and Ethereum.

When it comes to bitcoin trading and price boosts, Musk's effect is very real. Indeed, in early 2021 he changed his Twitter hashtag to include the bitcoin's name. Within five hours, the price of bitcoin (BTC) shot up by more than $5,500 and added more than $110 billion to its total capitalization base.

All that from one tweet. That single incident in January 2021 was not the first time the world's second-wealthiest person (with a net worth of $150 billion, Musk is behind top-ranked Jeff Bezos, who has amassed $177 billion) caused a stir in crypto markets with his public statements.

Many of his statements and actions had already worked to prop up the price of BTC and other cryptos, notably Dogecoin, before and after the historic tweet.

Myths and Fictions Dispelled

Whenever a single individual builds up such a high level of credibility, all sorts of myths and pieces of misinformation begin to form.

In this case, the biggest mistake financial writers tend to make is to overstate Musk's effect on not just cryptocurrency, but dozens of other things, like the stock market, the inflation rate, public perception of electric cars, and the future of private space travel.

For example, the price of crypto coins rises and falls with regularity. For instance, after his January twitter tag incident, BTC's price did rise considerably, but it's also fallen several times since then in response to other market factors completely unrelated to the Tesla chief's activities and statements.

In short, Musk's influence is just one of hundreds of forces that move the crypto market, and it's certainly not the most powerful one.

The Dogecoin Situation

The CEO of Tesla has had a far more pronounced impact on the value of a formerly unknown crypto called dogecoin. It was priced at just a fraction of a cent when the first tweets started coming from Musk's account, most of which extolled the virtue of doge as a cool coin and one of his favorites.

In early 2021, he issued one of his most famous messages via Twitter, "One word: Doge." Within hours, the price of dogecoin shot up, but has since retreated and stalled. Even so, amid all the ups and downs, tweeting and TV appearances, a previously anonymous crypto soared from a less-than-a-penny valuation to its current price of 42 cents.

Would this have happened without the social and economic influence of one person? Probably not. The doge case is more clear-cut than the one for BTC.

Is Huge Personal Influence a Good Thing?

Whenever one person appears to have outsized power over the trading markets or the economy as a whole, the results are mixed. Investors in bitcoin and dogecoin no doubt like the fact that they have a super-cheerleader on their side.

Business moguls like Warren Buffett and Carl Icahn have been members of that small club in years past, and still hold sway over the securities markets. Musk's major arena is cryptocurrency, and as the decade unfolds, it's possible he's back other alternative coins with equal success.