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Bitcoin is Not Wise Investing. Neither is Tesla. Do This Instead.
To beat inflation, follow the advice of the manager of the best-performing mutual fund in the world.
If your investment goal is stability versus inflation, then Bitcoin may be your avenue of choice. But if you want growth, specifically growth that beats inflation and multiplies your money, Bitcoin is not the smartest tool you should use.
There is one main advantage of Bitcoin: it has a specific, limited supply. This advantage is also its main disadvantage. Bitcoin is neither a fiat currency nor a representative currency (such as writing a check backed by money in the bank). Its value is based solely on its intrinsic value, or whatever value its holders believe it is worth. Because of its limited supply, the demand for it creates its worth. It is a meme currency.
Limited Supply & Inflation
A fiat currency is a legal currency. The word fiat is a Latin word meaning “determination by an authority.” If the government needs more money (hello stimulus checks), then the money printers go BRRRR. More people have $600 in their pockets, but that same money today buys fewer things than it could buy a few years ago. This is inflation.
Bitcoin doesn’t have money printers going BRRR. There’s only so many Bitcoin; the supply has a capped limit. This capped limit hedges Bitcoin against inflation from fiat currency. Not only from a country’s cash supply but also from stocks.
For instance, let’s look at Tesla. Their stock printers are going BRRR. When Tesla needs more money, it sells more stock. In the past two months, Tesla has given itself $7 billion by issuing more stock. There is a set limit of stock, but it has no cap. I’ll tell you later in this article why this dilutes the stock and will cause its value to drop in the long-term.
Bitcoin is a Meme Currency
The strength of Bitcoin is also its kryptonite: its value is based upon the undeclared value and a capped limited supply. Look at that last sentence. You should have two questions: who determines money’s value, and who determines Bitcoin’s value?
