Elon Musk has always openly displayed his support towards cryptocurrency whether it has been through his tweets in favor of Bitcoin and Dogecoin or with Tesla’s massive investment in Bitcoin that has shot up the prices of several cryptocurrencies worldwide.
However, one of his recent tweets has cost him a price of $15.2 billion in a day. This occurred when Tesla Inc. shares slid 8.6% on Monday, impacting his wealth so much that, he is no longer the world’s richest man.
NDTV reported, “Musk drops to second on the Bloomberg Billionaires Index of the world's 500 richest people with a net worth of $183.4 billion -- down from a peak of $210 billion in January.” “ Amazon.com Inc. founder Jeff Bezos reclaimed the top spot even as his fortune fell by $3.7 billion to $186.3 billion Monday,” it added.
It is witnessed that the two billionaires have been swapping places and fluctuating since January due to the volatility in the value of Tesla. According to Forbes, the pioneer electric car company has plunged 25% and lost over $200bn in market value since its Bitcoin investment.
This steep decline in the shares happened after Musk issued a comment over the weekend stating that the prices of Bitcoin and smaller rival Ether “do seem high."
Let’s understand all that happened.
Overview Of Tesla’s Investment With Bitcoin
Two weeks ago, Tesla invested a massive $1.5 billion in Bitcoin, where it was claimed that the Tesla CEO, gained 43,000 bitcoins during various operations in January. It was stated the company will move forward and accept Bitcoins as a method of transactions. This investment did well for the company as it raised its market value above one trillion dollars for the first time. It also resulted in Bitcoin crossing a $58,000 per unit value for the first time, in the past week.
However, things went downhill since February 22nd, when on Monday Bitcoin experienced a sharp decline to fall down to $53,000 per unit.
It is interestingly speculated that both the rise and fall in the prices of Bitcoins were an impact of Elon Musk’s tweeting spree.
It started when last Friday, on Feb 19th, a user mocked Musk for his rising support towards cryptocurrency. The user quoted a remark made by Musk last December.
Economist and market strategist Peter Schiff through his tweet commented, "According to Elon Musk 'Bitcoin is almost as much of a hoax as fiat money.' So Musk considers both Bitcoin and fiat money to be bullshit. I agree, I just think that Bitcoin, which is a digital fiat currency, is even more nonsense than the paper fiat currency issued by central banks. Gold is not silly. It's real money and better than both!"
To explain this in simple terms, Fiat money or inorganic money is not based on the value of precious metals but supported by a general belief that it has value. For example, the Dollar, the British Pound, the Euro, and the Yen are fiat money.
To this, Musk responded:
“An email that says you have gold is not the same as having gold. You could also have cryptocurrencies. Money is just a piece of information that allows us to avoid the inconvenience of bartering. That data, like all data, is subject to latency and error. The system will evolve toward that which minimizes both.”
Musk attached another tweet to the last one which read: "That said, BTC and ETH (bitcoin and Ethereum) seem to be high."
It is widely speculated that with the release of this tweet, the market immediately experienced a downward spiral and caused the Bitcoin crash. It is true that this may be a temporary phenomenon owing to how volatile bitcoin is.
Commenting on this fall of value, Neil Wilson, the chief analyst at Markets.com said, “It should go without saying that new investors to Bitcoin should be prepared for major volatility and for prices to drop suddenly and as sharply as they have risen."