Tesla CEO Elon Musk cautions Cryptocurrency Investors.
Key Points
- Elon Musk urges that investors not invest too heavily in cryptocurrencies.
- He believes that “true value” is made by producing products and services that people use.
- Musk’s advice is right.
Tesla CEO Elon Musk is widely known for being free-spirited, and he doesn’t mind expressing his opinions on any subject matter ranging from politics to technology. The Tesla CEO usually shares his views on whatever the hot topic of the moment might be.
In most cases, I do not pay attention or agree with most of Elon Musk’s opinions, comments, or tweets, and you don’t necessarily need to also agree with him. However, if you are a cryptocurrency enthusiast or an investor in digital coins, you need to read this article.
Don’t bet the farm
It’s an open secret that Musk is a big lover of cryptocurrencies. Although he does not have Shiba Inu (CRYPTO: SHIB) in his portfolio as some thought he would, he’s been a longtime advocate of Bitcoin (CRYPTO: BTC). His organization, Tesla, has hugely invested in Bitcoin and even accepted Bitcoin as a form of payment for some time.
Musk has also called himself “the Dogefather” because of his love and support towards Dogecoin (CRYPTO: DOGE). Earlier this year, the billionaire technologist revealed that he also owned Ethereum (CRYPTO: ETH) in addition to Bitcoin and Dogecoin.
Last month, Musk was asked in a tweet about another cryptocurrency. He replied that he only owned Bitcoin, Dogecoin, and Ethereum, confirming what he said at a conference in July 2021. However, he also gave a warning: “Don’t bet the farm on crypto!”
This statement wasn’t the only time that Musk has urged his followers not to go too far with investing in digital coins. In February of this year, the Tesla CEO stated, “People should not invest their life savings in cryptocurrency, to be clear — that’s unwise.” In May, he tweeted, “Cryptocurrency is promising, but please invest with caution!”
Where to put the bulk of your money?
Musk even hinted at what investors might consider doing with the bulk of their money that isn’t invested in cryptocurrencies in his October tweet. Immediately after warning not to bet the farm on crypto, he said, “True value is building products & providing services to your fellow human beings, not money in any form.”
Warren Buffett couldn’t have said it better himself. Unlike Musk, the legendary investor has a visceral dislike of cryptocurrencies. However, both men agree that companies that provide products and services that people use create value while other assets such as digital coins and gold don’t.
Musk likely had his own companies; Tesla, SpaceX, The Boring Company, and Neuralink in mind when he referred to “building products & providing services.” That’s where the bulk of his fortune is.
Although he is yet to reveal how much he has invested in cryptocurrencies, it is believed that it is not a large amount.
In early 2019, Musk said that he only owned 0.25 Bitcoins which were given to him by a friend. In October of this year, his tweet said that he bought Bitcoin, Dogecoin, and Ethereum “out of curiosity.” This does not in any way reflect or indicate a large amount in any of the digital coins in his possession.
Why Musk is right
Most investors probably don’t need to hear Elon Musk tell them not to bet the farm on crypto, but some need to be told.
And even for those who understand the importance of diversification and managing risk, the temptation to invest more heavily rather than being prudent into digital coins can be ridiculous. That’s especially the case when you see millionaires and even billionaires who made their fortunes putting a lot of money in Shiba Inu.
Musk’s warning deserves attention for one simple reason: He’s right. His advice doesn’t just apply to cryptocurrencies, of course. Investing too much into any asset can be dangerous, whether it’s Bitcoin, Shiba Inu, or Tesla stock.
In any investment, there is a need for diversification.
However, digital coins are even more speculative than a stock such as Tesla. The valuations of cryptocurrencies depend on factors that tend to make them much more volatile than most stocks.
Yes, some cryptocurrencies will go “to the moon.” Others, though, are more likely to crash and burn. Buffett’s hard line against buying any cryptocurrencies goes too far for many investors. But Musk’s cautionary perspective is one that everyone should heed.
