Backchat: Causing a ruckus with cryptos; Covid, sport and politics

Question: which person’s comments can shift an entire asset class? 

 

The most obvious answer is US Federal Reserve chair Jerome Powell. But a strong second choice would be Elon Musk. 

 

The South African billionaire electric vehicle maker/self-promoter has gleefully manipulated the value of Bitcoin this year, likely to his own benefit. 

 

In late January, Musk added the hashtag #bitcoin to his Twitter bio, and two weeks later, on February 8, Tesla told the Securities Exchange Commission it had invested $1.5 billion into Bitcoin and would accept them as payment. The digital currency soared from $38,100 to around $46,000 within a week.  

 

Then on May 12 Musk changed his tune, announcing that Tesla would no longer take bitcoin over concerns that mining for the crypto could encourage more fossil fuel usage (hardly a secret – see page 20 for more). Bitcoin’s price collapsed from $72,000 at the time to $32,449 by May 24. 

 

Musk then reversed again on June 13, saying Tesla could take bitcoins from miners who source half their energy renewably; the crypto duly hopped up from $35,716 to over $40,000 the following day. 

Musk has also boosted Dogecoin, a cryptocurrency that was created as a joke; its value soared from $0.00971 on January 3 to $0.6576 on May 5, up 67-fold – then collapsed to $0.3182 on June 16.  

 

It’s not the first time people have been suckers for get-rich-quick schemes (think: South Sea bubble, Tulip bubble, dotcom bubble. Spoilers – they all popped). And people who bought into Bitcoin and some crypto peers have made fortunes. 

 

For those with money for a flutter, buying some digital currencies may appeal – even when based on a dog. But caution should be the watchword for any asset that can be so easily influenced by publicity-seeking celebrities. 

 

If the value of cryptos collapses, Musk will still be a multi-billionaire. Not many others can make similar claims. 

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FAILING FOSSILS