Somehow, subconsciously, the investing public and trading communities have gone through something of a people’s revolution.
It began back in January this year with the GameStop volatility which was caused by comments on a Reddit subgroup known as WallStreetBets, creating a historic course of events that was subsequently propagated across mainstream media and financial portals under the buzzword-style category of ‘meme stocks’.
Whilst many brokerages and banks struggled to price their tradeable assets as volatility took hold, in some cases locking their traders out of their accounts, the meme stock flash crash created a new era in which any private individual who is a member of an internet forum, or any person with a highly influential profile on the world wide web can create their own market.
This has been absolutely evident over the past week, as notorious disruptor Elon Musk, whose innovations have literally come from nowhere and made waves in existing long-established industries such as the online
payments sector, electric vehicles and space technology has now become a mover and shaker in the trading world.
And that would be an absolute understatement.
Musk, a calculated genius if a little eccentric, knows exactly what he is doing. He is now one of the world’s richest men, and not via his highly R&D-heavy projects and inventions, but via his avant-garde approach to investing which he has now refined to the extent of influencing entire markets to the tune of more than the national GDP of various western countries.
Musk’s tweets relating to Bitcoin have recently decimated the price of the 11 years established cryptocurrency, a market movement that was swiftly followed by the Chinese government’s announcement of its intentions to ban the use of cryptocurrencies for payment.
The difference is that China’s announcement was purely political. It was to stem the free market opportunities that cryptocurrency traders have in China and to stop Yuan from being exchanged for cryptocurrency outside the boundaries of the Chinese People’s Republic.
Musk’s tweet that Tesla would no longer accept Bitcoin as payment for electric cars was purely promotional.
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Musk’s intent was clear. It was to draw attention to the cause of electric vehicles and the need to back low-emission, environmentally friendly and responsible energy methods across all aspects of business, hence his decision to lambast Bitcoin for its energy-hungry, high electricity consuming nature with regard to how the digital coins are ‘mined’.
This was an extremely clever move. Not only did it highlight Tesla’s perceived moral high ground, but it also created a huge dip in the price of Bitcoin to Musk’s advantage, as he is a cryptocurrency advocate and has been vocal about his support for Dogecoin, calling himself the ‘Dogefather’ recently.
Now, just a few days after the tremendous devaluation of cryptocurrency, in an event which resulted in 5 digital coins dropping in value by $700 billion in just one day, Musk is at it again, and the cryptocurrency community is, according to British mainstream media reports, asking him to stop tweeting.
There was an air of calm last week during the massive drop in prices which cannot be contemplated in terms of the sheer size and scale of the loss of value, however, now it all appears less bizarre. Musk knew exactly what he was doing, and cryptocurrency investors actually paid more attention and tried to get in on the action by showing interest in buying, even though the crash was not preventable and there was no guarantee that it would not go down further.
Today, it is rising again. Just one hour ago, Bitcoin was back up to $40,000 which although still a long way short of the $65,000 it ran at in mid-April, is a return to some serious value.
Musk is partly behind this once again, as he tweeted today that he “spoke with North American Bitcoin miner, and they committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.”
What we are witnessing is a transfer of market-moving power into the hands of pretty much anyone with internet access.
It may be a rollercoaster, but it is also a definitive power shift that means choosing your broker, asset classes and trading platform carefully.
Andrew Saks Head of Research and Analysis at ETX Capital