What You Need to Know
- The token is now worth about as much as it was when Tesla first disclosed in February its intention to buy some.
- Because Bitcoin has no underlying fundamentals it’s inherently a speculative bet on market trends in the years ahead.
- Meanwhile, crypto insiders say the Musk-driven volatility is just a temporary blip and will soon blow over.
Elon Musk helped legitimize cryptocurrencies in the eyes of Wall Street investors. Now, his tweets are scaring them off.
About a quarter of Bitcoin’s value has been wiped away in the span of a week, in part thanks to head-spinning tweets from Musk on everything from Bitcoin’s toll on the environment to whether Dogecoin is the better digital currency.
The token is now worth about as much as it was when Tesla first disclosed in February its intention to buy some.
Musk has always been tongue in cheek with his crypto dabbling, but his latest posts have sown confusion across the industry and revived the debate over whether the nascent asset class is a serious investment.
What Your Peers Are Reading
Key Crypto Issues
Can Bitcoin ever be a hedge against inflation and gold alternative with volatility like this? And is it simply a running joke on Twitter for the world’s second-richest man?
These questions are resonating with GAM Holding AG, which oversees 124.5 billion Swiss francs ($138 billion), as unpredictable swings in crypto are proving a major drawback.
“Its volatility is so huge that it can actually distract clients from their investment goals,” said Julian Howard, head of multi-asset solutions at the firm. “It’s often driven by tweets rather than fundamentals.”
Before this month’s roller-coaster, the widespread adoption of crypto had been on an upswing, with Tesla’s $1.5 billion purchase of Bitcoin in February a watershed moment. At the time, Musk announced he would allow customers to buy cars with Bitcoin and would keep a portion of Tesla’s balance sheet in the token.
The move, the first by a major corporation, raised expectations that other corporate treasurers would follow suit and adoption of crypto as a medium of exchange would take hold. Goldman Sachs Group Inc. and Morgan Stanley also announced plans to offer their clients exposure to crypto.
With hordes of new retail and institutional investors piling in, prices shot up from $29,000 in January and reached $60,000 last month.