| Hi Taylor:
I've been watching Bitcoin and other cryptocurrencies go through massive
price swings, and it gives me pause with the whole thing. It seems
like Elon Musk can just tweet something and change the value drastically.
Hi Juan: Look, you're not wrong. The excitement around Tesla,
Bitcoin, and Dogecoin means Elon Musk has the power to raise eyebrows
just by posting his thoughts online. I agree it's a little unsettling,
but it's worth taking a step back and thinking about all the different
angles to this equation.
speculation. Crypto's volatility comes from its ambiguity.
You can make a handful of transactions with Bitcoin, but we still
don't have a universal practical application to anchor this type
of money in our daily lives. When the Tesla CEO says people can
buy Teslas with Bitcoin, that's a huge step toward a practical,
tangible exchange. When he later says Tesla won't accept Bitcoin,
it feels like a step backwards even though the changes hadn't
really been implemented yet. I think we can still expect to see
a lot of financial growing pains with crypto, so no one should
be surprised by giant fluctuations in price as big announcements
2. Environmental impact. In abandoning his plans to accept
virtual coins for cars, Musk cited the fact that Bitcoin mining
isn't particularly eco-friendly. If you hadn't heard, the super
computers mining coins through complex mathematical equations
use a ton of energy. It's hard to compare the environmental impact
of Bitcoin mining versus powering a large banking building, but
the energy consumption is definitely substantial. People have
known about this for a while and there are some efforts to use
cleaner power sources, but that doesn't change the fact that when
someone with a big platform makes a statement about this issue,
the markets will react.
3. Information overload. This all comes down to a bigger
investing issue that we're grappling with more and more. Social
media reaches every corner of the globe; a popular figure saying
something important on Twitter or Facebook or TikTok means we're
all going to hear about it. Like stocks, crypto investing is reactionary;
so depending on who's doing the talking and what they're saying,
the financial impact can be extraordinary. People talk about whether
or not this is market manipulation, but it's hard to view it as
anything other than freedom of speech. The internet has always
been a hard thing to regulate, and this is just another version
of that struggle.
can be fickle. Sometimes we just have to ride out the lows to enjoy
the highs. Good luck!
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.