Despite Elon Musk's prediction that inflation in the U.S. has peaked, Bitcoin is in short supply at Tesla. During the company's annual meeting in August, Musk noted that the country's next recession would not be as severe as previously expected.
Tesla recently sold all of its Bitcoin holdings. The company is seeing the emergence of a new type of economic environment that is characterized by risk assets' growth.
During the company's annual meeting, Musk said that the prices of Tesla's components are already cheaper than they were six months ago.
Recovering from price hike
The CEO said that the prices of various commodities are currently trending down, which suggests that inflation is already at its highest level. Musk indicated that the prices of some of Tesla's products will fall in the next six months.
"We sort of have some insight into where prices are headed over time, and the interesting thing that we're seeing now is that most of our commodities, most of the things that go into a Tesla — not all, more than half the prices — are trending down in six months from now," Musk said. "This could change, obviously, but the trend is down, which suggests that we are past peak inflation."
The decline in the prices of various commodities has boosted the recovery in risk assets, such as Bitcoin. This is because the lower inflation rate is expected to give the Federal Reserve less impetus to raise interest rates.
Tesla exited its entire Bitcoin exposure last month, making a profit of just $64 million. The company's decision to sell all of its assets is ironic, given the potential for crypto to perform well should the markets return to strength.
During the company's annual meeting, Musk noted that Bitcoin could potentially return to Tesla's balance sheet later. He also said that the decision to sell all of its assets was not a commentary on the cryptocurrency.
The company's annual meeting also produced more optimistic predictions about the future. Musk said that the country's next recession would be more manageable than experts had expected. He additionally said that inflation would drop rapidly.
Reflecting the positivity surrounding Musk's comments, crypto commentators are betting that the markets will recover.
According to Fundstrat Global Advisor, the markets have already found a bottom around the middle of the year before the Fed begins to raise interest rates.
The firm said that the second half of 2022 could see the S&P 500 hitting its highest level since the start of the year. This would be a huge boost for the crypto markets, as it closely correlates with the broader stock market's performance.
Elon Musk said he sees signs the global economy is “past peak inflation”, a mild recession that could last 18 months, inflation is going to drop rapidly at some point in the future. Tesla just sold 90% of its bitcoin holdings for cash flow. https://t.co/7tM1qYiGml
— Wu Blockchain (@WuBlockchain) August 7, 2022
Tesla dumps Bitcoin, Musk endorses DOGE
Musk said on Sunday that Dogecoin is more likely to be used in transactions than Bitcoin. He made this revelation during a podcast called the Full Send Podcast.
The world's richest man is a massive supporter of Dogecoin. According to him, blockchain technology can handle more transactions than Bitcoin.
“Frankly I’m a major supporter because I think Doge is unique, both as a meme and a dog and doesn’t take itself too seriously," Musk said. "I think it’s really weird that even though Doge was designed just like this ridiculous joke currency, Doge’s total transaction capacity is actually higher than Bitcoin.”
Musk then added that DOGE can also be used as a payment method for various companies, such as SpaceX and Tesla. It can additionally be used to pay for the services of The Boring Company, which runs a transportation company in Las Vegas.
Musk said DOGE transactions can be completed in around 60 seconds, while Bitcoin transactions take approximately 10 minutes. The transaction speed alone is enough reason the CEO invested heavily in DOGE.
Lastly, Musk said that DOGE's inflation factor could be a better alternative to Bitcoin than it is to establish its own currency as a transactional currency.