We all are fimiliar with Elon Musk's little affair with crypto currencies. It started with bitcoin, is now at dogecoin and God knows where it'll be a couple of months down the line. The relationship of Elon Musk and cryptos is literally "Sadak se utha kar star banaunga".
It all started with a tweet about Tesla investing a sizable portion of it's surplus cash in bitcoin as an alternative investment. And this was not something new. Financial experts have always viewed Crypto currencies as a good way of diversifying one's investments as they have very less correlation with market or any other asset class, and hence reduces one's portfolio risk. But now that Elon Musk tweeted about it, Bitcoin surged unnecessarily. Another tweet about Tesla selling cars for bitcoin, which they can keep adding to their bitcoin reserve and boom, bitcoin gained around 20% and set a new all time high of around $60000.
But wait a minute, what's a love affair without some twists and turns. It's time to spice up things a little bit.
Just yesterday, EM tweeted about the environmental concerns of bitcoin and said Tesla won't be accepting Bitcoins as payment method any more. And lo and behold. Bitcoin tanked by 17% in just 2 hours, and was now trading at lowest since March 1.
In the midst of this fiasco, enters dogecoin. A currency made just as a joke and was given to memers on reddit to show their appreciation for a good meme. The founders themselves said they just built it in a few hours as fun and had sold all dogecoins they had in 2015 to but to buy a honda civic. But let's not forget that memes are a big deal for genZ and so the internet culture kept pushing this coin to fame. It's final glow up came after a celebrity tweeted that they bought some dogecoins for their little baby. And that celebrity was... *drumroll* ...Elon Musk. Just last week, Elon Musk went to SNL show. When the show was being aired, someone mysterious sold large vloume of dogecoins and "coincidently" Elon Musk happened to give some discouraging statement about about the coin at the same time. As a result, the coin plunged drastically and retail investors were not able to sell their holdings as trading platforms like Robinhood crashed.
And now many other such pointless coins are emerging in the market which promise to be the next dogecoin. The problem with these coins is that their value depend upon how popular they are and how much buzz is there in the market. Thus, reckless speculators try to find an undervalued crypto which has the potential of dogecoin, buy and promote it to others and as soon as it increases a little bit, dump it and move on to the next one. They are becoming so popular that they now have a name of their own: Shitcoins. Which sums them up very accurately.
But what's the point of me telling you all this? I just wanted to show you how speculative the world of cryptos is where a strong currency like bitcoin is dipping and a meme coins are escalating like anything. And all this is not driven by fundamentals. It's just based on buzz in the market. A strong influencer creates a hype by tweeting something good and also creates panic by tweeting something negative about the same thing. The ultimate looser: retail investors who are swayed by tweets of these strong influencers. Influencers make sure to square off their positions before influencing the market in a certain direction. In easy words, buy before you praise it and sell before you critise it. At the end, let's not forget that Warren Buffett has himself said "I don't own any cryptocurrency and I never will".