“Elon Musk himself made his ‘Twitter game’ more dramatic, confusing investors who hold Bitcoin and Tesla shares,” Bloomberg said.
Tesla’s stock price is tied to Bitcoin
Tesla’s stock price is now directly related to the Bitcoin value, after billionaire Elon Musk’s company invested 1.5 billion, according to analyst Daniel Ives of US investment fund Wedbush. USD in this virtual currency.
“With Wall Street investors, Musk is now in the Bitcoin story and while Tesla is making more than $ 1 billion a month on Bitcoin, it comes with a lot of risks, as seen this week,” Ives told CNBC.
With Tesla sinking deep into the crypto market, this sub-investment could obscure the fundamental vision of electric vehicles for its investors in the short term, says Ives. Even so, Ives believes Bitcoin investments are “Tesla’s smart, timely move.”
Earlier this week, Ives estimated Tesla had “pocketed” more than $ 1 billion from his Bitcoin investments.
“On the downside, this investment is like playing with cannons. Tesla’s story now has more risks and volatility,” Ives said.
Tesla shares fell more than 11% at the start of trading on Feb. 23, the day after the biggest drop in months. This code closed with a decline of 2.19%. `
Previously, Tesla shares closed down 8.55% on February 22 when investors believed that the pandemic was no longer a push for major technology firms and flocked to cyclical stocks. period. This is the strongest decline session of this code since September 23, 2020 (down 10.34%).
Apart from Bitcoin, other cryptocurrencies also plunged. Compared to the previous day, Ether, Stellar and XRP were down 10.06%, 11.2%, and 14.81% respectively.
“Elon Musk and his fans have incredible power for market prices,” said Mati Greenspan, founder of Quantum Economics.
In an interview with Zing on February 22, financial expert Craig Erlam (based in London, UK) said that Elon Musk “once again enchants the market”. But this time, the Tesla boss’s statement is no longer in Bitcoin’s favor.
The effect from Elon Musk exposes the risks of Bitcoin
According to experts, the “Elon Musk effect” for the market has exposed Bitcoin’s volatility. The most recent ups and downs of this currency indicate that the price volatility will not disappear even with the participation of large institutional investors.
In an interview with CoinDesk, economist Nouriel Roubini even called Musk’s intentional tweets “criminal behavior.” He describes investing in Bitcoin and then pushing prices up as “irresponsible and manipulating the market.”
“Bitcoin does nothing but help those who hold it to make money and sell the dream of getting rich quickly. The more the coin grows, the more risks it becomes, especially with increasing interest. of institutional investors,” financial expert Craig Erlam warned.
Many other billionaires also warned about the risks of Bitcoin. In an interview with Bloomberg, Microsoft founder Bill Gates said he was not a fan of Bitcoin for environmental reasons. Because this system uses a lot of energy.
Bill Gates thinks Bitcoin is a redundant invention. He also confirmed that he does not currently hold any cryptocurrencies in hand. “Elon has a lot of money and is sophisticated, so I don’t worry about the bitcoins he holds going up or down,” argued Bill Gates.
“But investors who are flocking to buy may not have much money. So I am not optimistic about Bitcoin. In my opinion, if you have less money than Elon, be wary,” said the founder of Microsoft concentration.
Billionaire Bill Gates said he does not care about bitcoin because they consume too much electricity and use too many uncontrolled anonymous transactions. However, Bill Gates is quite supportive of cryptocurrency technology: “Cryptocurrency is a good technology”.
According to Bill Gates, virtual currencies are not bad things, but it is important that they comply with the law but still retain the advantages of convenience and low cost in the transaction process.
Regulatory agencies expressed concern
Speaking at the Bloomberg Investment Summit in New York, Martin Flanagan, President and CEO of Invesco said, “Bitcoin is very interesting”. “However, at some point, you can see many central banks around the globe jumping into the crypto game,” Flanagan warned.
“I think that could put the value of Bitcoin at risk,” he added.
According to Bloomberg, Indian billionaire investor Rakesh Jhunjhunwala also argued that the country’s regulator should ban cryptocurrencies like Bitcoin. The so-called “Warren Buffett of India” insists “will never buy Bitcoin”.
The Indian authorities have yet to decide on Bitcoin or other cryptocurrencies. However, Bloomberg said there are speculations that the government is planning to ban all private virtual currencies and launch its official digital currency.
“I think regulators should step in, ban Bitcoin and focus on the digital rupee,” said Rakesh Jhunjhunwala.
Pressure from US Treasury Secretary Janet Yellen’s comments also weighs heavily on Bitcoin’s price. “I don’t think Bitcoin should be widely used as a transaction mechanism,” Yellen told CNBC journalist Andrew Ross Sorkin at the New York Times’ DealBook conference.
According to her, Bitcoin is highly speculative, volatile, risky for investors and often used for illegal financial purposes.
The US Treasury Secretary also criticized Bitcoin as “an extremely inefficient way to conduct transactions”. “The amount of energy it takes to process those transactions is amazing,” she notes.
In an interview at the Daily Journal’s annual shareholder meeting, Berkshire Hathayway vice president and longtime Warren Buffett partner Charlie Munger were asked if he thinks Bitcoin hits $ 50,000 or Tesla’s capitalization. reaching $ 1 trillion is crazier.
He replied: “I had the same difficulty as Samuel Jackson when he was asked the same question. I cannot ‘rank’ between fleas and lice. I have a similar view on these two factors, Not sure which is worse. ”
Tesla shares rose 743% last year, although this year is down about 3%. The electric vehicle maker’s capitalization is currently around $ 689 billion. Meanwhile, the price of Bitcoin continued to rise over the past week after Tesla announced an investment of $ 1.5 billion in the digital currency.
Munger was also asked what is the biggest threat to the banking industry, whether it is Bitcoin or a digital wallet like ApplePay or Square.
“I don’t think I know the future of the banking industry, I don’t think I know how the payment system will develop. I think that a well-run bank is closed,” he said. contributed greatly to civilization and the central banks around the world wanted to control their banking system and money supply.”
The Berkshire Vice President added: “Hence, I don’t think Bitcoin will become a medium of exchange for the world.
Bill Gates: Don’t invest in Bitcoin if you’re not as rich as Elon Musk
According to Reuters, the CEO of Tesla said that in today’s negative interest rate environment, only fools are not looking to other investments. “Owning Bitcoin – simply a form of liquidity less ‘silly’ than cash – is reckless enough for a company on the S&P 500 index,” Elon Musk wrote on Twitter on February 18.
However, in an interview with Bloomberg News, Microsoft founder Bill Gates warned the investors who intend to follow in the footsteps of Elon Musk to pour money into Bitcoin.
Accordingly, billionaire Bill Gates believes that Tesla founder Elon Musk has investment strategies that are difficult for the average person to follow and that they should be extremely cautious unless they have more money than Musk.
“Elon Musk has tons of money and he is very sophisticated … So if you don’t have as much money as Elon Musk, you should be careful,” billionaire Bill Gates told Bloomberg News.
According to the founder of Microsoft, he is quite concerned about many crazy people pouring money into Bitcoin even though they do not have much money or knowledge needed for this market.
According to a recent survey by Harris Poll, more than 1 in 10 Americans have never heard of cryptocurrencies like Bitcoin, Ethereum and Dogecoin.
Nearly 50% of respondents only heard the names of coins, 28% considered it “somewhat familiar” and 16% revealed “very familiar with cryptocurrencies”. The survey was conducted from February 12 to 14 on 1,984 people.
“For the majority, they are not cryptocurrencies, but ‘confusing money’,” commented John Gerzema, CEO of Harris Poll.
Most people who have heard of cryptocurrencies do not fully understand them either. About 61% of people admit they do not understand or understand very little about how they work. Only 14% of those familiar with cryptocurrencies say they understand “very well” how it works.
Among those who understand cryptocurrencies, about 43% expressed doubts about their legitimacy as a form of payment. 26% believe that cryptocurrencies will be forgotten within 10 years.
Meanwhile, 34% of people think cryptocurrency will become a standard form of payment. Therefore, if you really want to invest in bitcoin, you should listen to investment financial advisors.
Over the past months, companies like Mastercard Inc. and Tesla Inc. disclosed plans to accept payments in cryptocurrency. However, very few customers use Bitcoin to make purchases.
Only 10% of people familiar with cryptocurrencies say they use them regularly to make purchases.
”A genius or a hypocrite”?
But what does all of that have to do with Elon Musk and his support for Bitcoin? After all, Tesla did not create Bitcoin. The company is merely a buyer in the rapidly growing cryptocurrency market.
Bitcoin mining only makes money when electricity is cheap and Bitcoin’s price is high. According to estimates by Fundstrat Global Advisors three years ago, the breakeven point was $ 8,038 per Bitcoin. The electricity price does not change much after three years, we can assume that the cost of Bitcoin mining is kept the same.
Tesla’s decision made the price of this currency skyrocketing. This rate increased by about 6% just after Tesla’s announcement. In other words, due to Elon Musk’s decision, Bitcoin’s electricity consumption and CO2 emissions increased by about 6%.
“Will Tesla include those emissions in our next environmental impact report? More importantly, how does this investment match Tesla’s sustainable energy promotion goals?” question.
About two-thirds of Bitcoin mining takes place in China – the world’s largest emitter of CO2. The second-largest Bitcoin mining site in the US. The country is also the second-largest emitter of CO2 globally. Electricity is essential to life. Moving those resources to computers to solve algorithms puts a strain on society.
Last month, after weeks of power outages, Iranian authorities tightened control of local Bitcoin mining centers. They claim that these centers have benefited from cheap domestic electricity.