It seems as if any time Elon Musk sneezes the cryptocurrency market falls over.
Last week Musk made a statement (on Twitter of course) that Tesla might sell its Bitcoin. Surprise, surprise that turned out to not be true, which could end up interesting the U.S. Securities and Exchange Commission (SEC), although I’m sure Musk will talk his way out of it.
But the damage was done. Add that to reports that the People’s Bank of China was banning cryptocurrencies as a form of payment (old news actually, but reported as new) and Bitcoin tanked BIG TIME dragging Ethereum and many other coins down with it. So what’s happening now and what should you do?
- How much have cryptocurrency investors lost?
- Does Elon Musk reign over cryptocurrencies?
- What is happening with the crypto market short-term?
- What is happening with the crypto market long-term?
On Wednesday everything crashed and burnt in the first half of the day (once America woke up at least). Ethereum was the biggest loser, crashing below $2000 (briefly), down 40% on the day, and Bitcoin dropped at least 25% to around $32k.
People saw their crypto accounts nearly halve in the space of a few hours!
But then the big coins bounced back up strongly, though nowhere near where they had been on Tuesday (which was also down on the last few weeks).
Long-time investors in crypto stood their ground seeing this as a needed correction, but many investors sold as quickly as they could and moved into gold which saw a rapid price rise on the day.
No he doesn’t although he has held rather too much sway over crypto prices – particularly Bitcoin and dodgy Dogecoin – in recent months.
You may remember that Elon Musk and his ‘fratboy’ friends were the ones who bigged-up Dogecoin (a joke coin from beginning to end) and then he made it crash by a comment on the U.S. TV programme Saturday Night Live.
However, that behaviour and his latest comments on Bitcoin have primarily served to make investors – particularly crypto enthusiasts – respect him less. As this article in Coindesk shows, the response to his tweets about Bitcoin has been generally to ridicule his position.
So, although he did effectively push down the price of Bitcoin, Ethereum and many other coins, the effect didn’t last as long as it might have done this time last year. Quite a few people (myself included) went in a ‘bought the dip’ so Bitcoin and others have bounced back quicker than might have been expected.
Well guess what? It’s going up and down. There’s a surprise! In fact, in the last couple of weeks it has had some truly wild swings (particularly Wednesday). Bitcoin dropped a full 7% in the 24 hours after Elon Musk made his pronouncement and then a quarter of its value the day after. Just like being on the big dipper!
For those who have come into the crypto market recently and have only really seen it go up it might be a shock to the system to see such a big drop. Some have certainly sold out of fear, which is a shame in my view.
However, those who have been in the market for a while, who understand the space, will stay in and will add to their holdings.
In my view Bitcoin, Ethereum and many other cryptocurrencies have a long future. I personally invest in cryptocurrencies because I think they are the future of money. So, as with my stock market investments, I take a long view.
To me, these dips present a really decent discount on coins that are likely (though not definitely) to go up in value over time, so they are a ‘buy’ situation for me. I bought some more Ethereum on Wednesday. It was the drop I’d been waiting for. I bought some more Bitcoin the day after.
Many would disagree with me, including crypto-skeptic Laith Khalaf at stockbrokers A.J.Bell who commented:
“Consumers and investors may start to shun cryptocurrency, when they discover it’s an environmental deadweight, particularly younger Bitcoin fans who are also likely to be sensitive to climate issues. Bitcoin mining uses up a phenomenal amount of energy, and unlike traditional metal mining, doesn’t actually produce anything which is useful in the economy. Even celebrity endorsements may dry up as public figures become wary of being associated with an environmentally unfriendly product.”
But there is now the possibility that renewable energy plants might use their downtime to mine Bitcoin (and other coins). This would enable them to make money and become viable businesses without having to have government grants.
As this article from Bloomberg reports, an investment fund called ARK has been researching possibilities for Bitcoin and sees opportunities for miners to help green energy rather than over-using fossil fuels. It quotes ARK as saying: “Critics “assert that the computation required to secure Bitcoin, even if necessary, is environmentally damaging and ruining the planet,” the ARK research said. “We believe that the opposite is true: a world with Bitcoin is a world that, at equilibrium, generates more electricity from renewable carbon-free sources.”
If this is the case, not only does it silence the nay-sayers who point to Bitcoin’s energy-hungry nature, but it also gives this, and other cryptocurrencies, a truly long-term future, proving its use-case in more ways than one.
This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.