Musk owns Bitcoin, Ethereum, and Dogecoin -- and he's not selling.
It may come as a surprise to learn that Elon Musk -- a prolific crypto presence on social media -- is somewhat lukewarm on Bitcoin (BTC). To be clear, Musk does own Bitcoin, along with Ethereum (ETH), and his pet coin, Dogecoin (DOGE). But he's not as bullish about the granddaddy of cryptos as some might expect.
Let's dive into Musk's biggest concern -- the environment -- first, before looking at what the well known billionaire thinks of Bitcoin.
Bitcoin and the environment
Musk's main concern about Bitcoin is its high carbon footprint. Bitcoin uses about the same amount of electricity as a country the size of Thailand each year, according to Digiconomist. Given he is the CEO of Tesla, an electric vehicle company that says its mission is to accelerate the world’s transition to sustainable energy, it's an understandable point.
Tesla owns a decent chunk of Bitcoin and its decision to accept BTC payments in February 2021 was one driver for the crypto's huge growth in the first half of 2021. In a similar vein, Tesla's subsequent decision to stop taking Bitcoin payments was a big factor in May's crypto slump. Since then, Musk has hinted that Tesla might start accepting Bitcoin payments again, but only if there's evidence that half of the mining is powered by renewables.
What's slightly strange in all this is that Dogecoin uses the same widely-criticized proof-of-work mining model that's so damaging to the environment. As it's grown, so has its environmental footprint -- its annual energy consumption is roughly the same as Honduras.
What Elon Musk thinks about Bitcoin
Putting the environment to one side, Musk told the B Word Conference last summer that Bitcoin could potentially change the way we use money. "In general, I'm a supporter of Bitcoin and the idea of cryptocurrency in general," he said.
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"It's best to think of money as an information system," he explained. That information exists in a series of databases, such as those in banks around the world. Musk points out that, with a few exceptions, the current system moves relatively slowly. Plus, he says in many cases it is not very secure. As a result, Musk thinks there is potential for a better system. "I think it makes sense to support something that improves the quality of information with which we conduct the economy."
"Bitcoin is a candidate," he said. It stands out because of its scarcity, decentralized nature, and open ledger technology. But Musk also raised the low transaction volume and high costs as issues that could hold it back. Plus, he pointed out the average person will find it difficult to use.
In terms of Bitcoin as an investment, Musk has stressed several times that he's not an investor. Nonetheless, he recently tweeted that at times of high inflation such as the one we face right now, it is better to own physical assets like property or stocks.
"It is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high," he tweeted. "I still own & won’t sell my Bitcoin, Ethereum or Doge fwiw."
Should you invest in Bitcoin?
Bitcoin is the most-established cryptocurrency and many argue it's the "safest" in what is a high-risk asset class. As such, it's well positioned to survive a prolonged market crash and -- as Musk points out -- potentially change the way we use money. However, this is a relatively new and unregulated market and there's a lot we don't know about how it will evolve.
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One golden rule is to only invest money you can afford to lose in Bitcoin. That way, you'll be able to benefit from any gains without facing financial disaster if it collapses. Before you invest, stock up your emergency fund and make sure you're up to date on things like your retirement savings. Don't prioritize crypto over your other financial goals.
When you see headlines about people who've become Bitcoin billionaires, it is tempting to go all in. Instead, try to make sure high-risk assets like crypto only represent a small percentage of your overall investments. Financial advisors increasingly recognize that Bitcoin can play a role in a balanced portfolio, but the key is balance.
Ultimately, the decision to invest in Bitcoin depends on several factors. These include your financial situation and your views on how Bitcoin might perform in the long term. And don't take Elon Musk's word about crypto -- or any other commentators for that matter. Do your own research into what Bitcoin might do, what the risks are, and how blockchain technology might evolve.
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