When looking at a currency, you don’t usually think about volatility. The foreign exchange market does not move much, with currency pairs moving by mere cents. In fact, if you open a 5-year chart of the dollar/euro pair, you will find that the biggest moves were 15 percent in the matter of years. However, when you add the prefix “crypto” to currency, you get one of the more volatile assets in finance: cryptocurrency. Most cryptos can see a 15 percent move in a day, if not a single hour. To me, this doesn’t come as a surprise, considering the fact that a single man has a lot of control over the price movements of large cryptos such as Bitcoin.
We all know who that is: Elon Musk. His popularity allows his tweets to move the prices of assets instantly, and it has constantly happened in the last year. One of his tweets claimed that Tesla, his own company, is overvalued, which sent the stock price tumbling. Many consider him a market manipulator, and while that might be true, he has switched the topic of his tweets to cryptos. In the crypto market, due to the lack of regulations, it can be manipulated easily compared to the US stock market, which is overseen by the SEC.
As we saw on Wednesday, Musk announced that Tesla would no longer accept Bitcoin for car payments. This caused Bitcoin’s price to fall into a correction, and it stayed there for the rest of the week. However, this indirectly caused a ripple in the market. Musk cited environmental reasons as the discontinuation of Bitcoin payments, but he made his stance clear by saying that he believes in cryptos if they don’t use as many fossil fuels for mining. With Musk looking for alternative cryptocurrencies that consume less than 1 percent of its energy per transaction, all eyes fell to Cardano. Cardano is a blockchain platform that is like Ethereum, but it’s more of an updated version in the words of its founder, Charles Hoskinson, who was a cofounder of Ethereum. Its currency is an ADA, named after Ada Lovelace, and the key difference between it and Ethereum is that Cardano is a third-generation platform, which essentially means that it’s more scalable, consumes less energy, and it has a higher transaction speed. Reports say that it’s 1.6 million times more efficient than Bitcoin, which is a vast improvement that Musk must be noticing. During the crypto correction, Cardano saw an increase of nearly 20 percent in its value, which was very promising. Soon, you will be able to trade Cardano in your Invstr+ account!
Even with all of this going on, Musk decided to have fun with Dogecoin. After all, he is the Dogefather. He tweeted that he was working with the Dogecoin development team in the hopes of decreasing transaction fees and increasing block speed. Obviously, Dogecoin’s price rose by 50 percent, but things got more interesting. Musk tweeted that he would consider creating his own cryptocurrency if Dogecoin wasn’t able to implement this. Do you have any ideas what Musk’s cryptocurrency would be named if it existed? Also, what is your outlook on the future of Cardano?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.