Elon Musk Says, “Jump!” – Bitcoin Says, “How High?” and the Market Rises Again

The Bitcoin market is no stranger to bursting bubbles and volatile fluctuations, but the effect that Elon Musk has on Bitcoin is uncanny. For months, Musk’s words have had an effect on Bitcoin prices. Recently, Bitcoin hit another peak after Musk tweeted that Tesla might start taking Bitcoin as payment in the future after previously saying the environmental impacts of mining crypto did not align with Tesla’s clean energy tech goals.

As a market that was previously supposed to be free from manipulation, it has become apparent that is not the case with cryptocurrencies. Let’s explore this phenomenon and learn how to invest responsibly in such a potentially volatile market.

Investing in Bitcoin

Bitcoin is the most valuable cryptocurrency that allows people to store and trade 100% anonymously. The forecasts for its success are optimistic, and it showed great resilience during the pandemic’s market crash.

The technology behind Bitcoin has also proved to be a worthy investment for companies like Facebook, IBM, or Toyota. Blockchain ETFs are free from the same market fluctuations as cryptocurrencies, and in places like China where cryptocurrencies are banned, blockchain stocks are booming against all odds.

That being said, as a general rule, you should only invest up to 10% of your investment portfolio into Bitcoin. Keeping a diversified investment portfolio helps manage risk, and with the volatility of the crypto market, it would not be smart to put all your eggs in one digital basket.

Musk’s influence on Bitcoin market

So what does Elon Musk have to do with it? From January to June, Musk’s whims have had a strange effect on the crypto marketplace, causing market fluctuations with just a tweet. In January he changed his Twitter bio to “#bitcoin,” and the price went up by about $6,000. In April, he urged his followers to move to Starbase and soon after, the STAR token’s price jumped up 6,000%.

After Musk announced in May that Tesla would no longer accept BTC as payment, Bitcoin went down 10%. Then earlier this month, he announced that Tesla would consider accepting BTC as payment again, and the price jumped up to nearly $40,000, the highest it had been in weeks.

The ability to manipulate a financial market with just a tweet is a power that very few have. Although this market is widely unregulated, the SEC has taken notice of Musk’s influence and fined him and his company a total of $40 million for leaking proprietary information that caused Tesla’s stock price to soar in 2018.

Organizations are also benefiting from the Bitcoin craze. When a company invests in cryptocurrency, they usually see a steep increase in press coverage, which is what happened with Musk and Tesla. While it is a costly way to generate publicity, corporations are hoping to cash in on Bitcoin as well.

Will Tesla accept Bitcoin in the future?

Musk recently tweeted that Tesla would not be accepting Bitcoin until the process of mining Bitcoin becomes greener. The owner of the electric car company said that he was looking into other cryptocurrencies that used less than 1% the amount of energy to mine that Bitcoin does. After he made this announcement in May, the Bitcoin market dropped, but then his June tweet said Tesla is interested in accepting BTC payments in the future if certain conditions can be met.

The truth is that 65% of Bitcoin mining takes place in China where coal is the number one type of energy production. His stipulations for accepting Bitcoin in the future are that mining must transition to a more sustainable energy, and Tesla will resume accepting Bitcoin as payment as soon as miners can prove that they are using about 50% clean energy to do so.

Bitcoin investing tips

Weigh the risks.

There is a considerable amount of risk involved when day trading cryptocurrencies because it is a new and volatile market, so it’s important that you are prepared in the event that you lose everything that you’ve invested in Bitcoin. Make sure that you’re never risking more than 2% of your total pot into day-to-day trading. And before you start investing any of your money at all, it’s wise to have a substantial amount of liquid savings built up.

Keep an eye on crime

Ransomware, phishing attacks, and other malicious cyberattacks are rising as our world turns more toward digital technology. And while physical Bitcoin e-wallets are virtually unhackable, hot wallets that are stored online can be hacked. Make sure that you research which Bitcoin wallets come with tight security measures to protect your digital investments.

Consider blockchain ETFs

If you are interested in investing in cryptocurrency but are concerned about the market manipulation and volatility, consider investing in blockchain ETFs instead. It’s a much less volatile market, and many companies are investing in blockchain technology. While Bitcoin may crash tomorrow and never come back, the tech behind blockchain is sure to be a profitable investment for the foreseeable future.

Conclusion

Bitcoin is a big deal because it was the first of its kind, and it has opened up the doors to many different possibilities. In fact, blockchain technology, along with other digital banking developments in Fintech, has created a new framework for understanding finance.

Since the crypto market and the blockchain foundation it’s built on are still fairly new, analysts, executives, and laypeople are all still figuring out how the volatile Bitcoin market is best played. It’s a popular marketplace for amateur investors even though it is the most volatile, so be wary if you are preparing to take the plunge, and keep these tips in mind.