Wednesday, May 29, 2024

How should a crypto investor react to Elon Musk’s tweets? “He plays his own game”

Tesla and SpaceX CEOs have repeatedly provoked a rise and fall in quotations. Why ordinary investors should take into account the words of a businessman?

Tesla and SpaceX CEO Elon Musk speaks frequently about cryptocurrency. Quite often his statements provoke a rapid growth or collapse of quotations.

Thanks to the attention of a businessman, the comic digital coin Dogecoin has grown by 8650% since the beginning of 2021, and is trading at a price of $ 0.35 on May 26. On May 8, the altcoin reached an all-time high of $ 0.73. This happened on the eve of Elon Musk performance on the American show Saturday Night Live.

On Wednesday, May 26, the businessman said that he had no influence on the development of Dogecoin and did not control its developers. At the same time, a few days ago, he urged subscribers to contribute to the improvement of the altcoin.

The collapse of Bitcoin to $ 30 thousand, which occurred on May 19, could also have been triggered by Elon Musk statement. On May 16, a Twitter user tweeted that investors would be disappointed if they learned in the next quarter that Tesla sold all of its bitcoin. To this Elon Musk, in his usual manner, answered evasively – Indeed. But the market took this tweet as confirmation of this possibility. The entrepreneur later denied this information and stated that Tesla had not sold a single digital coin since March.

Worth your attention

An ordinary investor should listen to what Elon Musk is talking about in his tweets, advises Janis Kivkulis, lead strategist at EXANTE. According to him, many investors have capitalized on the growth of Dogecoin, which was provoked by the entrepreneur. The expert does not exclude that the Tesla CEO Elon Musk will soon be checked in great detail for market manipulation, and he will have to limit his publications on social networks.

Elon Musk already had problems with the US Securities and Exchange Commission in 2018. Then the entrepreneur announced on Twitter that he plans to buy back Tesla shares at a price of $ 420. The publication triggered an 11% rise in securities, and was ordered to resign his post as chairman of the automaker’s board of directors for three years and pay a $ 20 million fine in a lengthy legal battle.

The tendency for one person to influence the market will gradually fade away, says Artem Deev, head of the analytical department at AMarkets. In his opinion, over time, Elon Musk tweets will cease to be important for the market, and investors will begin to focus on the actions of regulators, institutions and market professionals in order to roughly represent the further dynamics of assets.

Game Mask

When following the rhetoric of the head of Tesla, there is always a big risk for the investor, since the Elon Musk is playing his own game, says Janis Kivkulis. When Elon Musk said that Bitcoin was not environmentally friendly, investors probably thought about the environment as the last thing – it was a clear signal to sell, says the strategist. In his opinion, a strategy built on the statements of Elon Musk or other billionaires can be effective at times, but extremely risky.

On May 13, Tesla suspended the sale of electric vehicles for bitcoin due to the non-ecological nature of their mining. Musk explained this by the fact that Tesla cannot afford to harm the environment, so it will not accept cryptocurrency as payment until its mining is carried out using renewable energy sources. After that, the value of bitcoin fell sharply by 17%.

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