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Musk Defends Bitcoin Buy by Inability to Receive Return on Tesla's Cash

In his latest tweets, Elon Musk says bitcoin is 'BS" but better than fiat currency. Also alludes to Tesla buying dogecoin if the company's actions were directly reflective of Musk's opinions.


Last week, in a surprise move Tesla announced it bought 1.5 billion dollar bitcoin in its 10K filling. The company also said going forward Tesla will be allowing customers to use bitcoin to pay for products and services. Following the announcement, Musk hasn’t commented much about why Tesla decided to buy bitcoin.

However, today the Tesla CEO shared more thoughts on Tesla’s bitcoin purchase on Twitter. Musk’s comments come in response to a Bloomberg interview of Changpeng Zhao who is the CEO of Binance. Binance is the world’s largest cryptocurrency exchange by volume and recently launched a derivative market for dogecoin.

Zhao in the video commented about the perplexing nature of Elon Musk’s love affair with dogecoin. Changpeng noted that even though Musk seems to be a huge proponent of dogecoin, ultimately Tesla ended up buying bitcoin.

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In response, Musk pointed out what he personally likes and what Tesla ends up doing aren’t always the same. Here Musk seems to be suggesting if it was completely up to him Tesla would own dogecoin. However, Musk seems to believe Bitcoin by itself is a speculative enough asset for an S&P500 company. And dogecoin would be beyond the limit of speculation Tesla can stomach.

Having said that, Elon still seems to believe bitcoin is at least better than cash. Musk began by pointing out “bitcoin is a less dumb form of liquidity than cash.” Musk then continued by saying even though he is not an “investor” when fiat currency has a negative real interest, only a fool wouldn’t look elsewhere. A fiat currency refers to all types of normal currencies such as the dollar, euro, pound, yen… and so on.

These currencies derive their value from the state and the amount available is determined by the government of the state. The problem Musk is pointing to is, since in any financially healthy state there is almost always inflation, holding cash as an asset means the goods and services that cash could purchase are progressively diminishing.

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However, bitcoin, like all cryptocurrencies, derives its value from its software. And the software creates value by putting a cap on the amount of cryptocurrency that is available. In theory, this makes cryptocurrencies a more stable asset than cash.

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Still, Musk believes bitcoin is also “bs” although better than cash. By saying both bitcoin and cash are “bs” Elon is probably pointing out that any currency, be it crypto or fiat, derives its value from nothing that could be grasped in the physical world.

One bitcoin has the value it has not because of anything but because a consensus gave it that value. And the same applies to the dollar, euro, or any other currency.

Ultimately Musk seems to be happy with Tesla’s purchase of bitcoin. And given that in less than a month Tesla’s 1.5 billion dollars in bitcoin has grown to over 2 billion dollars it is not surprising he thinks Tesla has made a good investment.

So what do you think? Will the world’s future currency be in crypto? Or do you think fiat money will rule forever? And for those of you who think cryptocurrencies will win, has bitcoin already be knighted as the future, or do other cryptocurrencies stand a chance? Let me know your thoughts down in the comments below.

For more information check out: Tesla Cuts Model 3 & Y Prices As New Federal Tax Rebate Makes Customers Delay Their Purchases Also, see Boring Company Equipment Seen In Tesla Giga Texas As New Era Of Manufacturing Logistics Dawns

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.


Mark Day (not verified)    February 20, 2021 - 5:30PM

"Or do you think fiat money will rule forever?" Fiat currencies always return to their intrinsic value - zero - check out Zimbabwe, Venezuela, and Germany. Surprised that Musk didn't mention a store of value - precious metals. But with $1.5 billion to unload, may have been too much for the metal's market to absorb.