In developments that surprised absolutely no one, Elon Musk got a little mischievous on Twitter yesterday, assuring that he will “not sell” his Dogecoin.
The comments came on a thread with – you guessed it – bitcoin diehard Michael Saylor, CEO of software and bitcoin holding company MicroStrategy. In further developments, again surprising absolutely no one, Dogecoin jumped 10% up.
The thread was quite interesting though. Musk's question originally focused on inflation and what the Twitter community thought the rate would land over the next few years. With US inflation ticking at all-time highs, the issue has been the subject of much discussion and fears are rapidly spiraling out of control.
The Fed is widely expected to hike rates this week after February CPI hit 7.9%, with food and energy costs pushing prices up the most in 40 years. Combined with the fact that gas is at all-time highs, inflation really is the topic of the day as the Fed stands poised to hike for the first time in three years.
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Of course, Michael Saylor used this as his opportunity to tout the most polarizing inflation "hedge" of them all - Bitcoin. Proponents often cite the mathematically encoded scarcity – there will only ever be 21 million bitcoins, with the mining rate following a predefined schedule. With 19 million bitcoins already mined and the last bitcoin slated for 2140, the flight to capital to the scarce commodity will increase exponentially, the theory goes.
There is no doubt that the debt crisis, skyrocketing inflation, and continued institutional adoption of Bitcoin make a very intriguing argument for “internet magic money” to represent the inflation hedge that has traditionally been occupied by gold. The bull case states that if gold has a market cap of $12.7 trillion, bitcoin takes its place and establishes itself as the same value when you extrapolate that $12.7 trillion market cap and divide it by 21 million bitcoins, which is over $600,000 per bitcoin.
Personally, I believe Bitcoin is poised to establish itself as a store of value. However, I often grit my teeth when Saylor implores people to mortgage their homes to buy more bitcoin, or sell whatever they have to put into cryptocurrency. Sure, I love Bitcoin and am on board with the macro dominating vision. But there's such a thing as risk management, and there's no getting away from the fact that the asset is still frighteningly volatile right now. The average person with a mortgage just can't handle the 20% daily drawdowns that Bitcoin can cause. Saylor is a billionaire and to me it seems like he's completely lost touch when he spews out this bitcoin evangelical rhetoric.
Musk then did what he does best and pumped Dogecoin up 10% with the simple phrase "I still own and will not sell my Bitcoin, Ethereum or Doge fwiw (for what it's worth)". A little more sane and measured than his usual Twitter endorsements, and he painted a nice juxtaposition with Saylor's rabid fanaticism in trying to educate "those seeking advice from this thread" about inflation.
No matter what you personally think of Musk and Saylor, there's no escaping the fact that the macro climate — skyrocketing inflation, manic gas prices, war in Europe — raises all sorts of interesting questions about Bitcoin's role in the modern monetary environment.
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