This morning, traders woke up to cratering cryptocurrencies. Bitcoin tanked below $40,000, further wiping out months of gains. At one point, it dipped to around $30,000 before rebounding. Ethereum, Dogecoin, and other cryptos plunged as well. This most recent selloff was triggered by China’s crackdown on cryptocurrencies. But, of course, we can’t have a discussion about crypto volatility without mentioning the self-proclaimed “Dogefather” himself, Elon Musk.
Elon Musk has become something of an unofficial crypto financial adviser/internet troll, moving markets with memes, investment calls, and business announcements like Tesla’s initial proclamation that they would accept Bitcoin for purchases. As cryptos plunged today, the Tesla and SpaceX CEO took to Twitter once again:
“Diamond hands” is used when someone is holding on to their stake and not selling. Musk was clearly signaling that Tesla isn’t selling its Bitcoin, as #buythedip and #Bitcoin trended on Twitter. While Musk certainly isn’t claiming to be an official financial adviser, in this era of meme stock investors and NFT millionaires, there are clearly a lot of people who listen to him. Unfortunately, Musk has proven time and time again that he is not taking that influence seriously.
A prime example of this was his appearance on Saturday Night Live on May 8. Aside from his excellent monologue and admirable revelation about being a person with Asperger’s, Musk also created some less positive headlines. All eyes were on his SNL appearance, with Dogecoin surging in the week leading up to it, given his previous advocacy. But what Musk did that night would lead Dogecoin to drop by 35 percent in the 24 hours after his appearance.
Musk rolled up in a chair on Weekend Update with Colin Jost and Michael Che as a bespectacled “financial expert.” When Michael Che repeatedly asked Musk, “What is Dogecoin?” Musk gave different answers each time. Finally, when Che asked, “So it’s a hustle?”, Musk laughingly replied, “Yeah, it’s a hustle.” Musk then threw his arm in the air and yelled the Dogecoin rallying cry: “To the moooon!”
Hilarious, right? Not to Dogecoin investors, who watched the cryptocurrency dip 23 percent during the SNL appearance alone. And Musk didn’t stop there. Last week, he announced that Tesla would no longer be accepting Bitcoin, citing Bitcoin’s energy consumption and environmental toll (which isn’t a new discovery and a point environmental activists have been making since the cryptocurrency’s inception). He’s since sought to clarify, saying that Tesla has not sold any Bitcoin. That announcement initially began the selloff that we saw accelerate today after China’s most recent moves.
Some would argue that this isn’t Musk’s fault. While these are exciting 21st century currencies built upon awesome new blockchain technology, cryptocurrencies are risky, with their value dependent on how widely they’ll be accepted by marketplaces. Investors should know the risk and understand what they’re getting into, goes the argument. And that’s true — but we’re living in an age of democratized investing, with trading apps like Robinhood making it accessible to an entirely new generation of traders of all experience levels. There’s a lot of cash to go around, especially after the Covid relief laws put so much more money back into people’s pockets.
While we’ve seen a lot of positives of this democratized investing, with new wealth being created among people who would’ve never otherwise had easy access in the past, there have also been some negatives. People have lost a lot of their hard-earned cash following meme trends and influencers rather than focusing on making calculated investments in stocks that offer less risky, long-term gains.
With this in mind, Musk needs to think carefully about the weight of his own words. Given his intelligence in other fields, he should know that when he speaks, people listen. Carelessly throwing around trades to millions of fans who might take your word as gospel isn’t responsible. Indeed, you would think he might’ve learned a lesson from the trouble he got in with the SEC over prior tweets about Tesla.
To put it simply, Elon Musk is playing a dangerous game. While to him these might just be inconsequential fluctuations in his net worth, he’s toying with the savings of millions of people. It would be one thing if Musk displayed a serious discernment for the consequences of his actions, but he appears to see this as a joke.
Musk’s companies are clearly making incredible innovations for humanity in clean energy, AI, and space travel. He deserves major props for that. But people should stop listening to his investment advice and attempts to manipulate the market.
If this really is the start of a new roaring twenties, let’s all invest wisely so we can skip the not-so-great depression that followed the last time.