Tuesday, February 09, 2021
Musk is fueling the hype
The bitcoin remains useless
A comment by Max Borowski
Crypto fans are over the moon. The richest man in the world invests billions in Bitcoin. That doesn't change the fact that digital money is a dangerous pyramid scheme for small investors with no practical use.
Nobody can reliably predict where the journey for Bitcoin will go. It is entirely possible, and with Tesla's spectacular investment in the cryptocurrency, quite likely that the digital coins will continue to gain massively in value. So if you have money to spare and feel like a thrill, go for it!
The course could also collapse, however, possibly to zero. No Bitcoin-critical analysis can predict whether or when this will actually happen. One thing can be determined exactly: who uses Bitcoin and who doesn't. Speculators, traders and related service providers have gotten rich from the hype and earn more from every price fluctuation. Consumers get none of it, and retail investors should foot the bill in the end.
Crypto enthusiasts may get intoxicated by the latest news: Market capitalization – the theoretical value of all Bitcoin combined – has grown to roughly a fifth of that of the global gold inventory. Established companies outside the original crypto scene, as well as banks and asset managers, are increasingly investing money in Bitcoin. The payment service PayPal offers limited bitcoin transactions, and Visa wants to enable payments with the cryptocurrency in an uncertain future, as does Tesla.
Musk makes its own profits via Twitter
There is still only one reason to buy Bitcoin: the expectation that someone else will take the virtual coins from you at a higher price. The only motivation for this potential buyer to buy Bitcoin is the hope of another buyer, and so on. This chain can go on for a very long time. But at some point the dogs will bite the last.
Bitcoin does not offer any other use than the prospect of a financially proverbial "next greater fool", a next bigger fool similar to a classic pyramid scheme. Nothing else is what crypto supporters with the alleged store of value function – in English: store of value – mean in reality. Bitcoin is and remains completely unsuitable as a means of payment, even in comparison with relatively unstable currencies. The sharp price fluctuations also result in sharp price changes. In addition, Bitcoin transfers are by no means free. Transfers in conventional currencies using PayPal or other payment services are often cheaper, faster and more flexible. Add to that the disastrous energy balance of Bitcoin.
Elon Musk has decided to put himself at the forefront of the hype. In contrast to small investors, the risk for the richest person in the world when investing billions is manageable. With his cult-like following, especially among crypto-savvy nerds, Musk is uniquely able to drive the price up with a few tweets. The publicity stunt that Tesla will at some point in the future also accept Bitcoin as a means of payment under unspecified conditions has also fueled the price. The acceptance of virtual money, on the other hand, has no practical use for either Tesla or its customers. In practice, car purchases with Bitcoin are likely to remain meaningless.
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