The Weekly Commentary - 05/24/2021

Elon Musk Gets into Hot Water over Bitcoin

The controversial CEO of Tesla, Elon Musk, made headlines again this week in his mass U-turn on Bitcoin. Previously, Musk had been a big supporter of the cryptocurrency and was arguably hugely responsible for some of Bitcoin’s biggest gains. However, his pessimism on it this week caused a mass sell-off where the price plummeted. In fact, at one point, Bitcoin was at its lowest price since the end of February.

It all started when one Twitter account, CrytpoWhale, commented that “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”. While commentators on the Crypto market are two a penny, the big difference in this case was when Elon Musk himself replied with a simple ‘Indeed’.

Whether he knew what he was doing remains unclear. He went on to assert that Tesla actually had not sold any of its Bitcoin holdings – holdings that have made the company a lot of money since investing in it. However, he must be aware of the impact of his comments – given not only how many followers he has, but also simply who he is. You do not get to be the richest man in the world, without huge numbers of people watching your every move.

Bitcoin has since stabilized in price and, in fact, some investors are using the sell-off as a good excuse to increase their holdings. To some, it may be a good opportunity to add this type of investment to the rest of their portfolio. Others may see it as the market righting what could be an oversold asset.

Amazon is in Talks to Buy MGM

Amazon, one of the world’s largest tech companies, approached the big Hollywood studio, MGM, to see whether it would be open to being purchased. Should Amazon be successful in buying the movie giant, the deal could be worth an eye watering $9billion. It is yet another example of how this online bookseller has managed to expand and infiltrate so many different markets and become one of the biggest disruptors around. Amazon Prime, which offers a streaming service along with free next day delivery with its subscription fee, has an extensive library and is a big competitor of companies like Netflix. Not bad for a company that started in Jeff Bezos’s garage.

Additionally, the deal highlights the winners and the losers of the post-pandemic world. Movie studios have had a very tough 12 months with cinemas remaining closed for large parts of the year and film sets having to stop work. The James Bond franchise is a good example – its release date has been moved back numerous times.

In comparison, Amazon’s stock price fared exceptionally well throughout the pandemic, with its founder Jeff Bezos making billions a day as more and more people had to shop online during global lockdowns. The stock made such good gains that those making use of investment tracking apps with a portfolio holding Amazon, would have had a lot to smile about throughout 2020 – despite being stuck at home.

AT&T Eye Up merging with Discovery

Another merger made for some interesting news this week too. AT&T has reportedly made Discovery an offer through their company WarnerMedia. The telecoms company hopes to create a streaming giant to take on the likes of Amazon and Netflix in their proposed merger.

On paper, it makes for a good partnership as it means that WarnerMedia – one of Hollywood’s largest studios – will have a place to stream its productions thanks to Discovery’s streaming service and channels. While that makes for a great pairing, the two companies also have differing strengths too which should complement each other in the event the merger goes ahead as planned. While WarnerMedia makes some of the film world’s most famous franchises – like Harry Potter for instance – Discovery is known for its nature and science shows.

Bolstering their strengths is arguably of increasing importance. Streaming services are fast becoming a huge market as people consume more and more video content at home and fewer people go to the cinema. Covid or not, cinema numbers were starting to dwindle even before the pandemic, which made making big blockbuster movies an expensive task. Streaming services offer many Hollywood studios a lifeline by diversifying their income stream.

Doing Crypto the Green Yay – Why Cardano is One to Keep an Eye on

When Elon Musk made his aforementioned scathing comment on Bitcoin this week and with Tesla no longer accepting bitcoin as payment, other cryptocurrencies fell too. One cryptocurrency bucked that trend though and that was Cardano. Cardano is a platform which homes the cryptocurrency known as Ada. In the aftermath of Musk’s commentary, Ada enjoyed a 20% rise in its price.

Musk’s supposed U-turn on Bitcoin comes from reports that it, along with many other cryptocurrencies are not very green businesses. In fact, the electricity used on the computers that support many blockchain enterprises uses up huge amounts of energy. In comparison, Ada is far more energy efficient. Its founder even claims that it uses less than 0.01% of the energy that Bitcoin’s infrastructure needs. These energy savings are down to a new system that is employed called proof of stake blockchain protocol. It is different from other cryptocurrencies as it does not process the power that coins possess, but instead the percentage of coins a miner holds.

To many, understanding that is just one of the many complications behind cryptocurrencies and why they remain a controversial investment to huge numbers of investors. However, the proliferation of the market makes it difficult to completely ignore. When cryptocurrencies differentiate themselves apart from one another, like Cardano is doing, interesting investment opportunities arise.

Home Depot Surprises Forecasters

In a world where governments have the largest amount of debt ever seen in peacetime, and with many people suddenly unemployed, it is great to see some good news. Home Depot is an example of a company that has done fantastically well in the wake of the pandemic. In fact, its recent sales numbers show that as people were spending more and more time at home, they were spending more and more money at Home Depot.

The company saw its sales figures jump a massive 32.7% this week – perhaps supporting why its stock price has risen almost 20% since the start of the year. Analysts are also touting that the Covid-19 stimulus checks given out by the Government to the population are another reason why Home Depot has done so well. While Home Depot did raise some of its prices, its figures show that consumers were not only making bigger purchases, they were also buying more as well.