He is known for having the “Musk effect” in the market and even with the crypto in free fall, he supports it. But this time, Elon Musk fails to raise the currency.
With the cryptocurrency bloodbath leaving panicked investors rushing as bitcoin and other cryptos plunged and nearly $1 trillion in value ($1.4 trillion) was wiped from the market in a month, it seems not even billionaire Elon Muck can save the beleaguered sector.
In January, the dogecoin cryptocurrency soared in value by 15% after the world’s richest man said it could be used to buy Tesla merchandise in a tweet.
The digital coin, which started as a joke with a shiba inu dog meme, rose to US$0.20, with its overall value skyrocketing 5859% in the past 12 months, according to the Coinbase website.
Dogecoin also rose dramatically after the world’s richest man struck a deal to buy Twitter for $44 billion (A$61.4 billion) in April.
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Dogecoin traders expect Musk to clear his Twitter trade and the price has spiked accordingly, trading for US$0.160040, up 21.8%.
But on Friday, the SpaceX founder’s tweet stating that dogecoin has “potential as a currency” failed to excite the market, unlike previous times.
Dogecoin rose around 7% after Musk’s tweet, going from US$0.1172 to just US$0.1270.
The phenomenon of tech mogul tweets driving the market has been called the “Musk Effect” by some.
In May 2021, a tweet from Musk was credited with a rise of over 29% in a particular cryptocurrency.
Yet the cryptocurrency is battered by fears that it will ripple through the broader financial market.
Bitcoin was trading around US$28,300 (A$41,200) on Thursday afternoon, down 20 percent over the past week and nearly 60% lower than its all-time high of US$69,000 (A$100,000) in November 2021.
Other major cryptocurrencies, including Ethereum and Solana, are now worth fractions of their all-time highs.
Data from Google Trends revealed that global searches for “buy crypto” soared 102% on Thursday, after the cryptocurrency market slumped to its lowest level since 2020.
Daniel Sekers, managing director of Australian crypto-trading platform YourPortfolio, said the increase in selling pressure shows that crypto markets are similar to investment markets, which are subject to price-based pressures. macroeconomic and geopolitical conditions.
“It should be remembered that these are the first real-time crypto markets that are being tested in a “market correction” driven by economic and geopolitical forces. The last time was driven by the pandemic where the people were looking for an alternative and that started the mainstream adoption,” he said.
“Many say that crypto is not influenced by economic forces. Frankly I disagree. It is an investment asset like any other that will have forces driving its liquidity like no other. any other, especially as traditional investors begin to embrace it.
But the chief economist at trading firm ACY Securities, Clifford Bennett, said while the crypto market presented better odds than a casino, it was still risky business.
“Trading crypto in modest amounts is extremely entertaining while being dangerous due to the huge volatility,” he said.
“A lot of people got rich in crypto mania and a lot more lost their shirts. This is the very nature of any boom and bust in the tulip bulb market.
“In such markets there are the additional dangers of initial success leading to ever heavier bets by participants, I mean investing, until the inevitable reversal catches them at their point. the most heavily in debt. It doesn’t take long for them to lose everything.
There is a very real and distinct probability that the collapse of the crypto markets will only be the first link to break in the financial markets, he said.
“That the repercussions with a market so widely participated and of such a large size are inevitable both in terms of sentiment and very real earnings losses on the next and the next and the next asset class,” said- he declared.
“Just think about the start of the GFC, but a much bigger event, and you’ll start to understand how big the risk really is at the moment.”
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