Elon Musk has a blunt explanation for his embrace of cryptocurrency: it’s “less dumb” than cash.
The mercurial billionaire, whose financial decisions are often presented first to Twitter, much to the chagrin of American securities authorities, took to social media last week to double-down on Tesla’s $ 1.5-billion investment into bitcoin earlier in February.
“Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P 500 company,” he wrote.
“Bitcoin is almost as bs as fiat money. The key word is ‘almost.’ ”
Musk’s comments pushed bitcoin to a record high last week, with prices climbing to roughly $ 66,500.
In Canada, retail investors had their first crack at buying and selling a bitcoin exchange-traded fund on Thursday, when North America’s first bitcoin ETF launched on the Toronto Stock Exchange.
The Purpose Bitcoin ETF, developed by Toronto-based Purpose Investments, was approved for trading by the Ontario Securities Commission last week. The fund saw a record volume of trading on its first day, as investors bought and sold more than $ 260-million worth of shares throughout the day.
A second ETF, from Evolve Funds Group Inc., began trading on Friday.
Musk’s comments, paired with the newly accessible ETFs, have helped spark a speculative frenzy similar to those earlier this year, when hundreds of thousands of retail investors bet heavily on overvalued stocks like GameStop, AMC and BlackBerry. Fuelled by little more than vague prophesying on the future of money and who controls it, day traders have looked to bitcoin funds as a way to make some extra cash.
As the first ETFs began trading on Thursday, retail investors on forums like Reddit’s WallStreetBets noted the surge in interest.
“I’m up $ 300 just from moving some s— around before end of close today,” wrote one user, ‘Kevlorneswath.’
The ETFs make bitcoin more accessible to retail investors. Whereas few can afford a single bitcoin, now worth over $ 60,000 CAD, the ETFs entitle retail investors to access bitcoin investments without owning the asset directly.
But the funds are little more than a gamble, say experts.
Laurence Booth, a professor of finance at the University of Toronto’s Rotman School, says bitcoin is as much of a risk, if not more so, than stocks like GameStop and AMC.
“At the end of the day, bitcoin is just a random set of numbers created on a computer. Its value is mainly based on the fact that it’s not regulated by the government, and that there’s a finite supply,” Booth said.
“The question is: do you think the government’s going to allow it to replace the money they create? The answer is unambiguously no.”
For some investors, bitcoin has become an obsession in recent years. Aficionados have their own jargon, complete with slang like “HODL” — a misspelling of “Hold” — or “whale,” which describes organizations that hold large amounts of cryptocurrency (like, for example, Tesla).
The belief is that bitcoin, and cryptocurrency more broadly, will become an increasingly widespread method of payment and exchange.
Recently, Tesla started accepting bitcoin as a payment method for their products, and Visa introduced a rewards credit card that pays out in bitcoin instead of cash.
Large financial institutions have also taken note of the currency’s popularity. In a report published in January, JP Morgan noted that the price of bitcoin could reach $ 146,000 if its market cap is high enough to compete with gold.
But the currency’s value exists only because, rightly or wrongly, people believe in its potential, Booth says.
“In reality, it has no value whatsoever. Throughout history we’ve used all these funny things for currency to exchange with each other, and eventually we came up with government-mandated currency.”
Booth says he doesn’t expect that to change.