How Should Investors React to Elon Musk’s Tweets?
Elon Musk is one of the most accomplished, wealthy and powerful people in the world. Over the past year, he has made a habit of writing about cryptocurrencies on his Twitter account, inducing sharp fluctuations in crypto prices ranging between $5000 and $6000. We will proceed to look into the reasons why tweets of a single man make such a tremendous impact on the market, and which benefits can be reaped from the further remarks of the multibillionaire.
Why Elon Musk is a game changer in the crypto market
Elon Musk is a CEO of Tesla and SpaceX, whose net worth is over $150 billion. His Twitter account boasts 58 million followers, so it’s no surprise he has made a tangible impact on the cryptocurrency market. Not to mention that Tesla possesses 42,902 BTC which roughly amounts to $1,6 billion (taking into account exchange rate as of April 27th, 2021).
Elon Musk’s profound influence on every facet of the world’s technological development seems unlimited. His main power lies with the ability to draw newbie investors and enforce control over them. The thing is, that Musk, not least because of his engineering and entrepreneur talent, has long since acquired some sort of an iconic status for many people around the world. Lots of individuals are keen to buy Tesla stock or stock of other companies publicly endorsed by Musk just because he’s a cool dude.
There’s substantial evidence to back up that suggestion:
- Tesla’s market capitalization amounts to $800 billion, which is nearly three times higher than the total market cap of the American car manufacturers, although Tesla holds less than 1% of the world’s market in terms of manufacturing. Volkswagen AG, by contrast, has 14% of market share, but its market cap is only $144 million.
- Musk’s tweet, where he called on to use Signal messenger, elicited an uptick in Signal Advance stocks by outstanding 1100%. The entrepreneur’s fans caused a price leap for the shares of the company with a similar name, which had nothing to do with the messenger Musk had referred to. Press representatives of Signal messenger even issued a statement pointing out that people had been investing into the wrong company.
- Announcement of a live session on Clubhouse has shown the similar pattern. Investors rushed to buy shares of Clubhouse Media Group, causing its price to climb 100%. The problem was that it wasn’t the Clubhouse that Musk had brought up.
- Among other things, on his Twitter account Musk repeatedly joked about cryptocurrency Dogecoin. The coin’s price increased by 800% in the wake of these tweets.
Savvy investors, or, in fact, anyone with a shred of experience in stock trading wouldn’t make those mistakes.