Bitcoin - I'm Going To Make $ 200 Million More Than Elon Musk This Year

 Bitcoin - I'm Going To Make $ 200 Million More Than Elon Musk This Year

Elon Musk, the CEO of Tesla, recently announced that his company has bought bitcoin for $ 1.5 billion (almost AU $ 2 billion). The announcement sparked a surge of enthusiasm and a sharp rise in the price of the dubious cryptocurrency.

This spike in prices is good news for Musk in the short term. At one point, Tesla's Bitcoin investment increased by over $ 1 billion. But can enthusiasm be maintained? I think there is a good chance that Bitcoin's price will drop to its fundamental value next year, which is nothing.

Why Musk's decision is bad

Musk is not doing any favors to Tesla shareholders. If they wanted to witness the ups and downs of bitcoins, they could just buy them themselves. Now they have no choice; if they want to invest in Tesla electric vehicles, they are also vulnerable to Bitcoin's vagaries.

The usual excuse for diversifying investments is that it can reduce risk. But buying an extremely volatile bitcoin will make Tesla's earnings even more uncertain.

And Musk doesn't do any favors to his fans. As the "CEO of a rock star" with over 40 million Twitter followers, his reflections are widely reported in other media.

What will the bitcoin price do?

How likely is it that Bitcoin could lose half of its value within a year? Well, he has a form. After peaking at AU $ 24,000 in December 2017, it fell to AU $ 10,000 by February 2018. After recovering to AU $ 16,000 in July 2019, it fell to AU $ 8,000 by March 2020.

Bitcoin may be the purest example of a speculative bubble. It follows in the footsteps of famous bubbles such as the South Sea bubble, the Dutch tulip mania, gold circa 1980, the dot-com boom in 2000, and the US housing market before the 2008 global financial crisis.

Bitcoin limits

Bitcoin proponents often say that its value comes from limited supply. This is compounded by the fact that dissident users have created forks in the past leading to disruptive bitcoins like Bitcoin Cash.

But even if we accept the limit at par, there are no restrictions on the creation of other cryptocurrencies. There are literally thousands of them already, such as Litecoin, Tether and Dogecoin. In any case, just because something is in limited quantities does not essentially make it valuable.

Another argument in favor of Bitcoin suggests that it can be an alternative to traditional currency for making payments. The first purchase made with bitcoins was made over a decade ago: two pizzas paid for with 10,000 bitcoins. (I hope the customer liked the pizza because the coins will now be worth $ 500 million.)

 Bitcoin - I'm Going To Make $ 200 Million More Than Elon Musk This Year

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