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Tesla, Bitcoin, and Cryptocurrency: Elon Musk’s Influence is Driving Market Valuations and Prices
Mar. 02, 2021
Tesla, Bitcoin, and Cryptocurrency

Tesla, Bitcoin, and Cryptocurrency: Elon Musk’s Influence is Driving Market Valuations and Prices

It seems that anything Elon Musk touches (or tweets about) recently turns to gold. The power behind one man and his Twitter account is unprecedented. Crypto holders have been waiting on the edge of their seats with anxiousness and anticipation about what he’ll come out with next, and how it will affect their investments.

Tesla and Bitcoin

Bitcoin recently smashed another all-time high record of $58,000 a few days after Elon Musk announced that he converted $1.5bn of cash assets into the crypto amidst his plans to accept it as payment for his EV company. The surge in value following the announcement resulted in him generating more profits from Bitcoin than he did from Tesla in the whole of 2020. Analysts estimate his BTC profits to be around the billion-dollar mark.

Many skeptics questioned his reasoning and motives for putting his money in something that many mainstream institutions aren’t fully behind. He went on to tweet on February 19th that “only a fool wouldn’t look elsewhere” when “fiat currency has a negative real interest”. He stated that he’s no investor either, defining himself as merely an engineer with no other stock holdings other than his Tesla shares.

He did, however, tweet a day later that the price did “seem high lol” prompting a mass sell-off of the currency causing more than a 20% drop in value. This begs the question. How much power can Elon Musk and the internet community as a whole have on markets, and how much do other’s actions online affect our overall responses and behaviors.

On the EV side of things, Tesla’s stock took a dramatic drop in price of 20% caused by a mix of confusion over the availability of the new Tesla Model Y and the drop in bitcoin value. However, at the time of writing, Bitcoin has begun to level back out and Tesla is making back good pre-market gains. The initial drop may have worried some retail investors, causing additional selloffs. Though judging by past price fluctuations, Tesla always seems to bounce back and creates new support levels over the long term.

Musk and Dogecoin

Musk has also been in the news a lot recently for his association with the joke cryptocurrency Dogecoin. He’s even supposedly bought some for his son. Though this could just be a way a billionaire finds a way to spend his fortune. Nevertheless, his tweets and actions have caused incredible growth and volatility of late.

On January 29 the coin skyrocketed amid the whole GME, AMC, BB, NOK saga with Musk tweeting one day prior a mock-up of “Dogue” magazine in the style of Vogue. This prompted its highest jump in the coin’s history, 829% in less than 24 hours. To put that into perspective, it took Musk’s company Tesla a whole year to achieve such gains. But these are the numbers we see when trading on penny stock-type currencies—not billion-dollar companies.

On February 4th he tweeted, “doge” after young investors cried out for him to ‘pump’ it again, likely in an attempt to make a quick buck, followed by an amusing “ur welcome” with his face and the lovable Shiba Inu super-imposed on a famous Lion King scene.

Elon Musk tweet
Elon Musk tweet

Overall, Musk and other famous faces “memed Dogecoin to a $10bn” market cap according to one Forbes contributor.

Whether intentional or not, it seems that Musk has become somewhat of an “influencer” in the markets, leaving analysts wondering if these prices are sustainable in the long term. Additionally, the power of younger generation retail investors driven by social media is real and could result in price fluctuations never experienced before.

In short, markets are now at the mercy of Elon Musk and groups of retail investors over the internet, but whether this oddity is sustainable has yet to be seen. One thing’s for sure though, it’ll be interesting to see how things pan out throughout the rest of 2021.