A Billionaire’s Flaky Opinion Is Not Sound Financial Advice

A Billionaire’s Flaky Opinion Is Not Sound Financial Advice

Elon Musk is playing the crypto markets like a fiddle, and there’s nothing anybody can do about it.

With every tweet, Musk can impact the value of bitcoin, dogecoin, and any other cryptocurrency in ways nobody else can. Values rise and fall in double digits depending on Musk’s mood.
 
Check out just some of the latest headlines:
 
“Elon Musk Calls Bitcoin’ Brilliant,’ Better Than Paper Money for Value Transfer.” Coindesk, February 19, 2019.
 
“Bitcoin Plunges 12% After Elon Musk Tweets That Tesla Will Not Accept It As Payment.” CNN, May 13, 2021.
 
“Dogecoin Surges On Elon Musk tweet As Crypto Rollercoaster Continues.” The Economic Times.
 
“Bitcoin Price Lower After Musk Tweet.” Reuters, May 17, 2021.
 
For all we know, Musk could be banking millions from every tweet, buying and shorting with every tweet – secure in the knowledge that the herd will move wherever he wants them to. He knows crypto investors are young and impressionable and because crypto is highly liquid – just like stocks – he knows that he can move the market within minutes of a tweet.
 
Investors talk about timing the markets and anticipate the future ahead of the market to profit, but what Musk is doing is creating the future. He’s the puppetmaster, and investors are his puppets, so let’s not be naive in thinking Musk has nothing to gain from his tweets.
 
Musk didn’t get to be one of the richest people in the world without a plan. He always has a plan.
 
This type of market manipulation would get Musk into hot water if he made careless or manipulative comments about Tesla. That’s because the stock market is regulated by the SEC, which cracks down on this type of blatant manipulation.
 
Crypto, on the other hand, is unregulated and can be bought anonymously. As a result, Musk can manipulate the markets to his heart’s desire without consequence. He knows this.
 
Volatility and herd behavior are why the ultra-wealthy avoid speculative investing like day trading and cryptocurrency. They have no interest in investing in an asset that can lose a tenth, quarter, or half of its value within moments of a tweet, a comment on cable news, or any other buzzworthy event.
 
Besides volatility, there is another reason savvy investors avoid speculative stocks and crypto:  They have no value other than what investors place on them from their buying and selling activities.
 
Take, for example, stocks of floundering companies. Investors who band together on social media or Reddit can pump stock prices far higher than the company’s underlying value suggests. Likewise, crypto has very little value. It is not even useful as currency since it is still not a widely accepted form of payment.
 
Stock prices and crypto are fueled purely by hype.
 
This is only possible because of its highly liquid nature. Anybody with a checking account can open a Robinhood account and be trading within minutes. Buying and selling stocks is now just a matter of a click on a phone screen.
 
Next time you consider investing in stocks and crypto, take a step back ask yourself:
 

  • Did the underlying value of the asset justifies the price?
  • Did crypto suddenly become the only acceptable form of currency?
  • Of course, it didn’t, but why did bitcoin surge more than 500% in less than a year?

 
Nothing fundamentally changed about it in that year. It’s fueled solely by herd behavior, and from what we’ve learned in past herd-fueled bubbles, it never ends well.
 
A billionaire’s flaky opinion is not sound financial advice.
 
If you want to follow anyone’s advice, follow the ultra-wealthy who invest in tangible assets with an underlying value in illiquid private markets that can’t be manipulated by eccentric billionaires, social influencers, and talking heads.

About The Author

John Turley
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