Bitcoin was created in 2009 and over the next 11 years, Elon Musk Showed no interest in virtual currency. Then one fine day in early February 2021, he announced that Tesla had bought $1.5 billion worth of coins. This helped the cryptocurrency to go through the roof, which soon saw it reach all-time highs. This is now known as the ‘Elon Musk’ effect in the virtual currency market.
In the first week of October this year, Dogecoin spinoff Floki Inu Coin jumped 30 percent following a tweet by Elon Musk. Musk has a dog named Floki, which is a Japanese dog breed Shiba Inu.
This is not the first time that Elon Musk’s tweet has upset crypto investors.
In March 2021, Musk said, ‘I am getting a Shiba Inu.’ On the street As a result of these tweets, the Floki Inu grew 1,000 percent by September 15.
So, over a period of three days, the currency has increased 10x as a result of the tweets from Elon Musk.
musk effect
In February of this year, when Musk announced that Tesla had bought $1.5 billion worth of bitcoins, the cryptocurrency was up 20% in a single day.
On February 4, he wrote ‘Dogecoin is the people crypto’, which caused a sudden 50 percent jump in Dogecoin in one day. Overall, Dogecoin has seen a 15,000 percent jump in one year thanks to several tweets by Elon Musk expressing his support.
In March of this year, Musk announced that Tesla would accept payments in bitcoin, with the currency rising to $64,000 the following month.
However, soon after he warmed to bitcoin, he declared his hatred at Floki before his new-found love.
In May, Musk announced that electric car maker Tesla would not accept bitcoin due to environmental concerns. He wrote on Twitter that he was concerned about the rapidly increasing use of fossil fuels for bitcoin mining and transactions, particularly coal, which has the worst emissions of any fuel.
He acknowledged that bitcoin is a great idea but it may not come at a great cost to the environment. Bitcoin is down 10% shortly after the tweet.
The Ank-Ano crypto currency saw a massive 27% correction after this announcement. Dogecoin also saw a drop of about 20 percent in the same month.
cautionary tale
Since cryptocurrencies are quite volatile, such covert comments, flip flops and impulsive buying add fuel to the fire. A short-term investor may be riding the wave to exit the market too soon. But if you want to invest in crypto for a long time, it is not advisable to buy and sell on impulse.
For example, bitcoins may have risen to over $64,000 in April, but they were trading for $50,000 in October. So, if you have been in the crypto market for a long time, you can ignore the noise, keep your head low and wait for the right opportunity to exit.
We can summarize that Elon Musk’s tweets influence the price movement of crypto currencies but buying and selling currency as a result of another investor’s tweet (albeit a billionaire) is not a rational investment decision.
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