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4 Reasons to Keep Avoiding Bitcoin

I'm not even remotely tempted to buy the dip at these levels.
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I continue to remain very wary of bitcoin even as it hovers around $45,000 on Monday morning.

If you missed it, Elon Musk has been tweeting about bitcoin and that has definitely played a role in the drop. But that is only one of many reasons why I do not like crypto here (still).

1.Tesla's (TSLA) involvement spurred other companies to look at adding bitcoin. Now with Tesla's stock price well off the highs, and Elon changing his tune, many companies will put any larger-scale entry into crypto on hold.

2.The arguments about energy usage are worth considering. One paradox that I've discussed repeatedly is that the most die-hard "sustainable" believers also seemed to like crypto, which is a big energy user.

With over 50% of the hash rates solved in China, where they have been adding coal-fired generators, the environmental impact seemed to be ignored. I'm not sure that this is a big issue, but it will give people some pause. I'm more worried about China's dominance from an overall perspective than I am about the pollution, but it is something that will slow down adoption for now.

3.I think the pipeline hack was a seminal event. That hack turned "digital into physical."

A hack disrupted gas to many Americans, just as the summer driving season is upon us. The Biden administration seems to have taken notice. Ransomware remains one of the biggest uses of bitcoin. It is far easier to collect crypto for ransomware and believe it won't get tracked down and taken back, than it is if you demand the ransomware in dollars.

A current theme of mine, which I think is gaining traction, is to expect strong government scrutiny and new regulations. To the extent crypto mitigates sanctions and encourages hacking, look for some real pushback.

4. Owning crypto and ARK Innovation (ARKK) isn't a diversified portfolio. The number of investors who own crypto and some high-flying tech companies, whether those in the ARKK portfolio or directly, seems high. With both crypto and those types of stocks struggling, they may have to sell to protect profits and are unlikely to have many resources to add.

Crypto may yet survive these challenges, so I'm not writing it off completely, but I'm not even remotely tempted to buy the dip at these levels (if bitcoin nears $30,000, I might change my tune).

At the time of publication, Tchir had no positions in any securities mentioned.