Relevant and even prescient commentary on news, politics and the economy.

Has Elon Musk Damaged His Portfolio By Buying Bitcoin?

Has Elon Musk Damaged His Portfolio By Buying Bitcoin?

 After tweeting repeatedly for some time about bitcoin and the originally satirical degecoin, both of which have gone up massively in the past year, on Feb. 8 Elon Musk put his money where his mouth had been and had his Tesla EV company buy about $1.5 billion in bitcoin.  The immediate aftermath of this was a substantial surge of the crypto from somewhat over $40,000 to somewhat over $50,000.  This seems to have inspired several other major established corporations and entities to also announce they would be holding bitcoin as part of the asset portfolios, along with renewed discussions of more official cryptocurrencies possibly being issued by various central banks (commercial banks have for some years used XRP for transactions amongst themselves, but somehow it has not increased nearly as much as bitcoin or some of the other top cryptocurrencies for reasons I do not understand).

Anyway, it may be that instead of being a brilliant move that establishes the legitimacy and long term value of bitcoin once and for all, despite the massive amounts of electricity used in the mining of it, way more than for other leading cryptocurrencies, it is not out of the question that this may prove to have been its peak.  Bitcoin has been noticeably sliding in recent days, although it is still just above $50,000, which might prove to be a new floor, given all the corporate backers it seems to have picked up.

Is Bitcoin Really Real Money? Ontological and Epistemological Questions

Is Bitcoin Really Real Money? Ontological and Epistemological Questions

 The movement to make Bitcoin into a de facto form of money has taken a step forward when Elon Musk declared that he would be purchasing over a billion btc.  Some are claiming that Musk did this to pump up an alternative asset because Tesla stock is overpriced and may fall hard soon.  But who knows? Anyway, although btc fell today, it has reached dramatic new highs well over $40,000, with various people calling for it to go to $100,000. Many respectable financial advisers seem to be changing their tune, shifting to maybe one should hold a percent or two of btc along with gold in the non-income-earning part of their portfolios. Gold has remained flat just above $1800, and btc is the “new gold.  But is it (or any other cryptocurrency) really real money?  That is the ontological question of money.

Is Bitcoin Really Real Money?

Is Bitcoin Really Real Money? Ontological and Epistemological Questions

 The movement to make Bitcoin into a de facto form of money has taken a step forward when Elon Musk declared that he would be purchasing over a billion btc.  Some are claiming that Musk did this to pump up an alternative asset because Tesla stock is overpriced and may fall hard soon.  But who knows? Anyway, although btc fell today, it has reached dramatic new highs well over $40,000, with various people calling for it to go to $100,000. Many respectable financial advisers seem to be changing their tune, shifting to maybe one should hold a percent or two of btc along with gold in the non-income-earning part of their portfolios. Gold has remained flat just above $1800, and btc is the “new gold.  But is it (or any other cryptocurrency) really real money?  That is the ontological question of money.

So what is the ontological nature of money?  We know there are debates over which of the standard textbook functions is the most important, with use as a means of exchange, a unit of account, and a store of value the standard list. Some emphasize one over another. MMT advocates emphasize the unit of account function, especially when that unit of account is used to pay taxes.  In that view this is the ontological foundation is the declaration by a government that something must be used to pay taxes, with this also resolving the epistemological issue assuming the government has sufficient existing credibility and communications skills as well as enforcement capability to enforce making its citizens actually pay their taxes using the established form of money.