Many investors, the majority being freshers in the field of investing, tend to look up to Elon Musk for investing advice, even though he isn’t an experienced portfolio manager. But why is that?

Elon has 58.4 million followers on his Twitter platform on which he constantly posts content regarding cryptocurrency. This has gained him quite a fanbase who not just believes what he says but actually acts upon what he predicts or invests in.

Back in 2014, Elon started talking about Bitcoin in a positive light that made many wonder if Elon was Satoshi Nakamoto. But Elon shut down these rumors shortly after denying this fact and stated that he got into cryptocurrency due to a friend who had sent Bitcoin to him.

It was around 2019 that Elon ventured more into the world of cryptocurrency and realized that it could actually help his companies out. The technology and utility that cryptocurrency came with fit perfectly with the companies business models.

While there was inflation and Bitcoin was being used as a hedge by many companies, Tesla took a giant leap of faith and invested $1.5 billion in Bitcoin and even made it a mode of payment for Tesla products.

This was not only a big deal for Tesla and Elon but also cryptocurrency investors. With this big move, new investors joined the cryptocurrency investor base. This move by Tesla not only gained Bitcoin fame but also credibility in the process.

Not so long after this, Tesla sold 10% of their Bitcoin, which sent investors into a panic frenzy. But Elon calmed everyone down by stating this was just done to test its liquidity and that they still have Bitcoin investments at hand.

A short while later, Elon gave out the very disheartening news on behalf of Tesla. This news stated that Tesla products can no longer be bought with Bitcoin. The high energy consumption rates in the mining process of Bitcoin is the reasoning he gave that led him to back out. This resulted in Bitcoin falling drastically.

After viewing that scenario, it may seem to be that Elon is in control of what happens in the world of cryptocurrency. But on taking a deep dive into the functionality of crypto, some other facts are unearthed that defies the fact that Elon’s tweets aren’t what is responsible for the volatility in the market.

Factually, an assets price cycle comes in four stages that include accumulation, markup, distribution, and markdown. These factors are responsible for the growth and sustenance of the asset in the long run.

Towards the end of 2020, the crypto market was going through an accumulation phase where' investors started pouring into the market. The next phase, the markup, happened in February 2021 reaching all-time highs. The asset was later overbought according to the RSI indicator which showed that the distribution phase had commenced. A markdown phase progressed slowly after.

On taking a quick glance at Bitcoin prices over the years, the majority of the times involved Bitcoin dropping even before Elon tweeted out anything. So no, Elon is not always behind the dip in the price of Bitcoin but his tweets are used as a catalyst at times to correct what is going wrong in the crypto market.

Looking at it holistically, Elon’s tweets have taking cryptocurrencies on a bumpy ride all throughout the year. In January, Bitcoin faced a surge when Elon added #bitcoin to his Twitter following which Tesla’s purchase made the scenario all the more promising for investors.

Musk isn’t really bothered about investors’ financial health. In fact, his tweets may sway the market to his benefit and not the investors. Furthermore, investors, especially the new ones, tend to follow his tweets and invest accordingly. Many investors have gone broke in the process.

At one point his tweets and memes on Dogecoin really got to the public either as a joke which soon turned out to be something serious, with investors flocking to invest in it. This too made quite a few investors lose a lot of money.

So yes, technically and factually Elon doesn’t control the markets but does have a strong influence on them. In fact, he can sway it according to his whims and fancies. Also, any decision or tweet that Elon sends out more often than not is to his and his companies advantage and he does miss out on any opportunity that comes his way.

Of late, many have been raising concerns about the power that he holds and in turn the power disparity that exists between- him and his followers. Though Elon is no professional in the field of crypto, many new investors, as well as old investors, tend to follow his words blindly without doing any research prior to making a decision.

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It has also been stated that the more tweets that Elon sends out, the higher is the chance of the immunity of the market getting affected. But for now, Elon is one of the biggest influencers on Bitcoin prices and the way it moves in the market.

As of 2021, Bitcoin has gone up by 27%, and the famous meme currency, dogecoin, going up almost 8000% as of now. Many people have been calling this phenomenon the “Elon Musk Effect”.

Summing It Up

Elon Musk is not just an entrepreneur but a role model that the entire world looks up to. He isn’t just successful in any particular industry but has his hands full venturing out to always try something new to help him grow mentally while his companies progress in the process as well.

Elon and his tweets have been quite a catalyst for a while now, but depending entirely on this for knowledge on investing is not suggested.

We hope this article helped you out and good luck with your investing rendezvous.