I always say that this last year in the market has been crazy but even just the last week has been crazy.
Tesla and Bitcoin have been THE 2 craziest investments over the last week/months/year. There is something released each week about either of these two. What could push the price of both of them even higher? If they merged somehow. Well, Musk has just added $1.5 billion of Bitcoin to the Tesla balance sheet, he also added some gold which might give us a bit of an insight into the reason behind his decision.
Musk has frequently been a pumper of crypto’s on his twitter, often posting memes about Bitcoin or Dogecoin (Both now at all time highs). He finally stopped posting memes and put his money where his memes are. But why? My thinking is that there are two main reasons as to why he’s done this:
Reason 1: He is a believer in crypto and realised he could make a quick buck by putting his money where his memes are. Musk is fairly notorious for some of his tweets and has already been told off by the SEC for potentially market manipulating. This occurred after the infamous ‘Funding Secured’ tweet. Which saw musk make billions within hours. Therefore I think that potentially Musk has done this because he knows that this action will boost the price of Bitcoin and the price of Tesla. Which is quite a smart move if you think about it.
Reason 2: Musk is genuinely concerned about the financial stability of Tesla and the economy. As you may have heard there have been many conversations about stock market crashes and if we are due a crash. Personally, I think we are heading towards a correction, stocks are at an all time high and there is a fair reason for that but we also have to look at the economic impact of COVID and realise that someone has got to pick up the bill from all the stimulus packages. Therefore I believe that there could be a market and currency correction which makes perfect sense as to why musk has bought gold and bitcoin. Considering how high prices are, how weak the dollar is, how much corporate debt the world is in and how the stock market and housing markets are booming when we are in the worst job market in recent history, somethings got to give. It doesn’t add up. I know the economy != the stock market but the difference in levels is far too great for everything to keep on going as it is.
I’m not one to jump on the bitcoin train but I think this is a very intelligent move by Musk, he knows he has a cult following, he knows meme stonks is a thing right now and he knows he can profit purely just from that, but it is also a very smart move for hedging the Tesla balance sheet. All in all, a big brain play.
I wonder how long Musk can continue his streak of doing what he’s doing? Maybe one day the SEC will order him to take a break from twitter, who knows. Tell me what you think. I also wonder how many other companies will follow suit with what Tesla has done, many big banks and payment providers are beginning to accept bitcoin now so perhaps we might see a few other giant companies join the bitcoin hedge train, who knows.
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