Should you invest in Bitcoin? Elon Musk thinks so
The important points
- Tesla CEO Elon Musk is concerned about the high carbon consumption of .
- Musk thinks the leading cryptocurrency could transform the way we manage money, but he also knows it’s not perfect.
It may come as a surprise that Elon Musk, who is heavily involved with cryptocurrencies on social media, is rather tight-lipped about Bitcoin (BTC). Of course, Musk owns Bitcoin, (ETH) and his favorite coin (DOGE). But he’s not as optimistic about the granddaddy of cryptocurrencies as some might expect.
Before we take a look at what the well-known billionaire thinks about Bitcoin, let’s first address Musk’s biggest concern: the environment.
Bitcoin and the Environment Musk’s biggest concern about Bitcoin is its heavy carbon presence. According to Digiconomist, Bitcoin uses about as much electricity as a country the size of Thailand each year. As CEO of Tesla (NASDAQ:), an electric vehicle company dedicated to accelerating the global transition to sustainable energy, it’s an understandable point.
Tesla has a large stake in Bitcoin and its decision to accept BTC payments in February 2021 was one of the reasons for the cryptocurrency’s tremendous growth in the first half of 2021. Similarly, Tesla’s subsequent decision was to not accepting bitcoin payments anymore to assume, a major factor in the cryptocurrency’s May plunge. Since then, Musk has hinted that Tesla could start accepting bitcoin payments again, but only if it can be shown that half of its mining operation is powered by renewable energy.
What is strange is that Dogecoin uses the same widely criticized proof-of-work mining model that is so bad for the environment. As it has grown, its ecological footprint has also increased – its annual energy consumption is roughly equivalent to that of Honduras.
What Elon Musk Thinks of Bitcoin Besides environmental issues, Musk said at the B-Word conference last summer that Bitcoin could transform the way we use money. “In general, I’m a fan of bitcoin and the idea of cryptocurrencies in general,” he said.
“It’s best to think of money as an information system,” he explains. This information is stored in a number of databases such as banks around the world. Musk points out that with few exceptions, the current system is moving relatively slowly. Moreover, it is not very safe in many cases. So Musk thinks there is potential for a better system. “I think it makes sense to support something that improves the quality of the information we use to run the economy.”
“Bitcoin is a contender,” he said. It is characterized by its sparseness, its decentralized character and its open ledger technology. But Musk also cited low transaction volume and high costs as issues that could hold him back. Also, he pointed out that it is difficult for the average person to use.
As for Bitcoin as an investment, Musk has repeatedly emphasized that he is not an investor. Yet he recently tweeted that in times of high inflation like the one we’re experiencing right now, it’s better to own tangible assets like real estate or stocks.
“Owning tangible assets like a house or shares of companies you think are doing well is usually better than dollars when inflation is high,” he tweeted. “I still own my Bitcoin, Ethereum or Doge and will not sell them.”
Should you invest in Bitcoin? Bitcoin is the most widely used cryptocurrency and many claim it is the “safest” of this risky asset class. As such, it’s well positioned to weather a prolonged stock market crash and – as Musk points out – potentially transform the way we use money. However, this is a relatively new and unregulated market and we don’t yet know how it will develop.
A rule of thumb is: only invest the money you can afford to lose. This way, you can enjoy the gains without falling into financial disaster when the market crashes. Before investing, you should build up your emergency fund and make sure you are up to date, e.g. B. in terms of old-age provision. Do not prioritize cryptocurrencies over your other financial goals.
When you see headlines about people becoming bitcoin billionaires, it’s tempting to give it your all. Instead, try to ensure that risky assets like cryptocurrencies are only a small percentage of your total investments. Financial advisors are increasingly recognizing that bitcoin can play a role in a balanced portfolio, but balance is key.
Ultimately, the decision to invest in Bitcoin depends on several factors. This includes your financial situation and your assessment of how Bitcoin might develop in the long term. Don’t believe Elon Musk’s word on cryptocurrencies – or any of the other commentators either. Find out for yourself what Bitcoin can do, what the risks are, and how blockchain technology could develop.
The article Should you invest in Bitcoin? So thinks Elon Musk first appeared on The Motley Fool Germany.
This article was written by Emma Newbery and was published on Fool.com on 04/09/2022. It has been translated so that our German readers can join in the discussion. owns Bitcoin and Ethereum. The Motley Fool owns stocks and recommends Bitcoin.
The Motley Fool owns stocks and recommends Bitcoin, Ethereum and Tesla.
Motley Fool Germany 2022
This article first appeared on The Motley Fool