Elon Musk’s control over the cryptocurrency market is scary
Before I explain the impacts Elon Musk has had on the cryptocurrency, it’s safe to point out how complex and elastic this virtual world is. The problem with dogecoin is almost the same as the one I point out in my previous article regarding the future of successful business. Anything that has been successful due to a crisis or a disaster, but here, because a joke or a meme, may be one of the worst investment ideas and is not suited for the long run.
As a high school student, there is not a lot of concrete experience about long term investment that I can share with you, but I have a raw voice not manipulated by anything and there’s one thing I can tell you. A stock that decides to go up or down based on Elon Musk’s tweets and public appearances and not based on their performance as a company or their sales (if they had any) is extremely volatile and elastic and a high risk. What’s different with these investment opportunities is that you cannot calculate the p/e ratio, which is incredibly important when selecting a company to invest in. Only invest what you can afford to lose. Short term gains shouldn’t be misinterpreted as long-term gains.
Just because dogecoin may seem lucrative right now, chances are that it might not in the future and if you invest more than you can handle, you may lose your entire investment. And this won’t just happen slowly, but overnight.
We all saw what happened with GameStop. It was increasing suddenly and now it’s going down again. Why? Because the sudden interest wasn’t there because of how well the company was doing, it was there because a random group on reddit wanted to piss off wall street investors, and they were successful but what happened to people who kept their game stop stocks and didn’t sell at the right time? They are losing on all the profit they could’ve had.
Don’t invest in something because everyone is, and everyone knows about it. Invest in it because people don’t know about the potential.
I don’t want to discourage you from buying dogecoins, but think about it? It’s a trend the genz has latched on to and holding on to something is something we don’t do well. A company made famous for a short period of time due a meme isn’t always the best investment. People who had invested in game stop before the reddit group are the ones who benefited not the ones who bought it after. Why? Because it has reached its peak.
Doge coin is based on an inflationary model. Its supply will only increase with time. But, on the other hand, bitcoin’s will decrease. There will come a time when bitcoin will stop mining coins and the demand will completely overtake the supply. That might not happen with doge. Even though its price is booming, it might just be a craze and is likely to die soon.
Coming on to how Elon musk controls the market to a great extent. Bitcoin was considered as a viable payment method for Tesla, but without any prior notice, Tesla suddenly stopped accepting it as a payment method, decreasing its value by a great extent. Elon Musk’s SNL performance, his tweets, everything amounts to the decreasing and increasing of the value of the currency. During May, the value of Doge coin dropped 36% after one SNL performace. Ask yourself this question, how reliable and how good of an investment is dogecoin if it majorly relies on Elon Musk’s tweets, keeping in mind, they could change anytime. Elon Musk can today tweet about how dogecoin isn’t a good investment opportunity anymore and watch how the stock plunges. It will crash to an extent it won’t be able to recover from.
Investment is all about the risk. But the risk shouldn’t about one person’s opinion.
