Adam Sharp

Ignore Elon Musk, the World’s Biggest Crypto Troll

Every time Elon Musk tweets about bitcoin and its price moves, I cringe. Why? WHY? There are much bigger issues we should be watching. But for some reason everyone focuses on Mr. Musk. 

Don’t get me wrong, it was a big deal when Tesla announced it was buying bitcoin as a treasury asset. But everything since? Meaningless.

For example, on June 13, Elon posted that Tesla might be willing to accept bitcoin for payment once bitcoin miners use 50% green energy (which I suspect they’re close to achieving already). 

Bitcoin jumped nearly 10% after Musk’s tweet. But if Tesla does accept bitcoin as payment, it could result in maybe an additional 0.02% in transaction volume. It’s immaterial.  

I believe many of these “Musk moves” are caused by sentiment traders. They use algorithms to track and analyze social media traffic. In many cases, sentiment traders feed the results of the social media analysis to their trading bots. 

When someone like Musk — who has more than 55 million followers on Twitter alone — posts something positive about bitcoin, it spurs both algorithmic and traditional traders. Everyone jumps in, often with leverage

It’s short-term noise that should be ignored.

Musk’s bizarre pontificating about bitcoin — and then dogecoin — was bad enough. But he absolutely floored me on June 5 when he posted a very bullish message about one of the most notorious projects in crypto. I’m not going to give this “project” more attention that it deserves.

But this tiny, worthless coin went from $0.08 to $0.28 after Musk’s tweet. It’s a questionable project to say the least, and he told people that it was going to the moon.

There is no doubt that Musk intentionally pumped this useless coin. I have no idea why he would do such a thing. And I continue to be baffled at how anyone can take his cryptocurrency opinions seriously. This should be the final nail in the coffin of his crypto credibility.

What’s more important is macro and adoption.

I’m much more interested in the Federal Reserve and its unprecedented “easing” programs, which I expect to continue and accelerate over the next decade. On Wednesday, the Fed raised “inflation expectations sharply.” Of course, it says inflation is transitory and that it’s likely to raise rates “as soon as” 2023. But we’ll see about that.

At the same time, major institutional investor Paul Tudor Jones advocated for a 5% bitcoin allocation. Here are some excerpts from his recent CNBC interview.

“I like bitcoin as a portfolio diversifier. Everybody asks me what should I do with my bitcoin. The only thing I know for certain, I want 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities…

“For me, it’s just a way of kind of foundationally looking at how do I protect my wealth. Over time it’s a great diversifier. Again, I look at bitcoin as a story of wealth,” Jones added. “I look at crypto as a story of wealth. Others will argue this is a different ecosystem. It’s transactional in nature.”

Jones is not alone. Investing legends like Stanley Druckenmiller, Bill Miller and Ray Dalio have also gotten behind bitcoin in a very public way. (Miller has been a bull for many years now.) 

I believe we’re still in the very early innings of institutional crypto adoption. Now that these widely respected investors have made it clear that they believe bitcoin is a valuable portfolio diversifier and hedge, that paves the way for everyone else. 

If inflation turns out to be more than “transitory” and yields on bonds and stocks stay pitifully low, I expect a rush into alternative stores of value such as gold, silver and bitcoin. There are around $45 trillion worth of bonds in the U.S. alone. If even a sliver of that money comes into crypto markets, watch out.

I hope you have an excellent weekend. In the meantime, please do your best to ignore the biggest crypto troll on the planet.