One of the recent stories that broke on the internet is how the 51-year-old South African-born US-based businessman and engineer and the CEO of transformational companies, including Tesla, SpaceX, OpenAI, etc., Elon Musk, lost his position as the wealthiest man in the world. This is a position he has occupied since September 2021, after dislodging Jeff Bezos, the founder of Amazon.
Unfortunately, the prestigious title has now been given to luxury goods magnate Bernard Arnault after Elon Musk broke the Guinness World Record for the largest amount of money lost by an individual. What could be the reason behind this worse loss of fortune for the Tesla CEO? Could it be due to the drop in crypto? This post will delve into this crucial matter. Sit back and learn.
Alt: Bitcoins and U.s Dollar Bills
Musk, Tesla, and Cryptocurrency
Because cryptocurrencies have become more accessible, their popularity has skyrocketed in recent years. It is from this that numerous terminologies (such as crypto slots, Bitcoins, Altcoins, proof of work, blockchain, DeFi, ERC-20, ERC-72, NFT, etc.) were born. Besides, several top business personalities developed an interest in virtual currency and invested their fortunes in it. One of these individuals is Elon Musk.
Tesla announced in February 2020 that the company would acquire $1.5 billion worth of BTC and would also give people the option of paying through crypto. In March 2021, Elon Musk reemphasized this claim on Twitter. But later in May, Musk stated that the company would no longer accept cryptocurrency due to climate change. What could be the main reason why Musk lost his most esteemed position if crypto was not directly the cause?
The Reasons Elon Musk Lost the World Title
Forbes magazine data reveals that the peak of Musk’s wealth in 2021 was $320 billion. This financial record changed at the beginning of 2023 to $138 billion, which is the largest loss of fortune in modern history.
Bernard Arnault was able to secure Elon’s crown because of how the co-founder of Tesla and the owner of Twitter lost most of their fortune (roughly 65% of its value) tied to Tesla stock. Below are the reasons the stock has crashed.
1. The auto sector faced a terrible decline
2022 was a tough year for Tesla and other auto companies in the industry. They all experienced a slide in their stock values and battled similar challenges faced by the general economy, including rising interest rates and inflation. According to Cox Automotive, auto sales in the United States will reach a decade low in 2022.
2. A rise in competition
S&P Global Mobility shows that Tesla takes about 65 percent of the United States’ electric vehicle (EV) sales. However, there is a drop in this percentage due to the rise in competition from popular names such as BMW, Mercedes-Benz, Audi, Polestar, Rivian, and Lucid. This competition is evidently not friendly to the stock market.
3. Musk’s Twitter ownership decision
In January 2022, Elon Musk planned to acquire Twitter, Inc., initiated it on April 14, 2022, and finalized the purchase on October 27, 2022. This takeover is described as a headache for Tesla due to how Musk is focusing much of his attention on Twitter at the expense of Tesla. Billions of dollars’ worth of Tesla shares were sold by Musk to acquire the American social media company. This affected the stock terribly, leading to a sharp drop in Musk’s personal wealth.
Market Performance: Stock Markets and Cryptocurrency
There is a clear relationship between the stock markets and digital currency. In fact, they are associated favorably. Due to this, investors should expect that the volatility will influence the stock market performance in the cryptocurrency stock markets.
For much of 2021, the price of top crypto tokens experienced an incredible rise to new highs. However, the price of these tokens dropped swiftly in May by 40 to 50 percent.
Due to this unfortunate downturn, several crypto investors sold their crypto assets. After this massive sell-off, the stock market plummeted. Bitcoin, the coin with the highest rate in the crypto market, suffered an alarming crash. But it won’t be easy to conclude the extent to which the BTC slump has negatively affected stock prices.
Notwithstanding, the fast decline in crypto values on a significant level stands as a pointer to a bigger challenge. And this challenge can negatively influence equities that relate not in any way to digital currency.
Facts have shown that the decline in Musk’s net worth was primarily due to how the Tesla stock was poorly managed, leading to the plunge of the shares of the electric maker to 65% in 2022. The result was not only that Elon became the world’s second-wealthiest billionaire, but also that he lost a significant amount of money.
Although the cause could be traced to several significant factors, including the rise in competition in the auto industry, the terrible decline faced by the auto companies, and the decision to own the popular social media company, we can say crypto is also a major factor based on how it can disrupt the stock market.