On February 8th, Elon Musk and Tesla announced the purchase of $1.5 billion Bitcoin, noting that his company planned to further accept BTC as payment. Just about every crypto trader knows by now that this announcement skyrocketed Bitcoin’s price, subsequently bringing the entire market upwards, but was this decision to buy bitcoin really a sound move? Elon Musk has not had the best luck since doing so.

Problems with the Tesla Bitcoin Investment

In early January, Elon Musk was hailed as the wealthiest person in the world, worth $188.5bn, finally overtaking Jeff Bezos. However, around one month later, he announced his involvement in Bitcoin, and subsequently, by February 24th, he lost the position, and Bezos returned to the top spot.

How did he lose wealth so quickly? It all stems from the Tesla stock price, which tumbled from $781.00 to $652.00 in just a day; an intense 16.5% drop. While crypto investors may be used to such volatility in prices, the stock market is generally thought of as more stable, so a 16% price change can mean a lot. Elon likely triggered this by tweeting that Bitcoin and Ethereum prices “do seem high,” causing Tesla investors to worry and question whether he was truly right in his decision. However, Tesla shareholders should be used to these types of Twitter scares, as Elon Musk has used his account recklessly in similar ways before.

Should Elon have stayed away?

Tesla shareholders would say yes, as their investment is being harmed right now, but realistically it all comes down to whether Bitcoin is being overvalued or not. When Elon Musk bought in, 1 BTC was worth around $40,000 (the highest it had ever been at that point). Since then, it reached $57,000. That is a 42.5% increase in value. That certainly does not seem like a mistake. Perhaps it was reckless for him and Tesla to buy in when Bitcoin was at an all-time high, but it has already appeared to pay off. Shareholders may see it differently, as they are often not well-versed in crypto, and such a rise could have worried them, making them fear an imminent market correction.

There is another issue with the Tesla Bitcoin investment. Many crypto enthusiasts are uncomfortable with Elon Musk’s involvement as they consider the market to be a tool designed more for the masses rather than the wealthy elite. Some believe that at the heart of crypto is the idea that it gives the everyday person autonomy from governments and ruling classes. If billionaires enter the market, their buying power influences the movement of prices in a way that retail traders simply cannot, meaning they gain control of those prices.

At the same time, big money entering crypto is also a good thing, as it marks real-world adoption, effectively showing the world that crypto is a serious asset class that people need to pay attention to.

Financially speaking, Elon Musk’s decision to buy Bitcoin was a success, both for him and for all Bitcoin traders as it rose the price. Tesla shareholders may think differently, and some crypto enthusiasts may be apprehensive of his move, but if Bitcoin is still a viable long-term investment, as many think it is, then his actions will likely be vindicated.