Should You Invest in Crypto? Here's What Elon Musk Thinks

Musk owns three different cryptocurrencies, but should you?

Elon Musk is well known for being a fan of cryptocurrencies and investing in them.

Even as Bitcoin and other popular coins saw their prices fall throughout 2022, Musk indicated he "won't sell" his cryptocurrency holdings. Musk owns three different virtual currencies -- Bitcoin, Ethereum, and Dogecoin -- although he has indicated he believes Dogecoin is better suited for transactions in the real-world than Bitcoin.

While Musk has made clear he's put some of his own funds -- and some of Tesla's funds -- into cryptocurrencies, you may be wondering whether the billionaire believes that everyday Americans should buy virtual coins as well. Here's what Musk has said about investing in this asset class.

Elon Musk believes crypto investments are promising

Unlike some other big names in the business and investing worlds -- including Warren Buffett -- Musk clearly believes crypto investments have a lot of promise and may deserve a place within your portfolio.

"If you want to speculate and have some fun — there’s a good chance that crypto is the future currency of Earth," Musk said in an interview.

Musk supports cryptocurrencies over fiat currencies, stating on Twitter: "The true battle is between fiat & crypto. On balance, I support the latter." Fiat currencies like the U.S. dollar are government-issued funds not backed by physical assets such as silver or gold. He also explained the reasoning behind his position, stating that "fiat currency tends to get diluted by whatever government it is. It ends up being a pernicious tax on people, especially those who have cash savings with a dilution of the money supply."

Musk has also indicated he plans to hold his crypto investments over the long-term, indicating "If the price of Bitcoin goes down, I lose money. I might pump, but I don’t dump. I definitely do not believe in getting the price high and selling or anything like that,” Musk said. “I would like to see Bitcoin succeed."

Musk warns not to ‘bet the farm’

Although Musk thinks cryptocurrencies show definite promise and they are likely worth investing in, he also doesn't want people to go overboard with putting money into an untested asset class that's both volatile and highly speculative.

"Cryptocurrency is promising, but please invest with caution,” Musk tweeted in May 2021. Musk has also commented that he "definitely wouldn't bet the farm on crypto," and said his investments were made "out of curiosity" and he believes "true value is building products & providing services to your fellow human beings, not money in any form."

In other words, while he believes there's potential for cryptocurrencies to thrive in the future -- he's warned it's not clear which coins will succeed in the long-term and there's a lot of speculation involved in investing in them. So investors should use caution, include them into their portfolio in moderation, and consider also investing in companies that offer products and services that add value to people's lives.

This advice is sound, and those who want to put some money in cryptos should likely follow Musk's plan to invest for the long-term, and make sure they aren't acquiring too big of a stake in any one coin due to the outsized risk.