SpaceX Surpasses Bitcoin in Value—But I'm Still Buying Bitcoin

The Rise of SpaceX and the Bitcoin Debate

SpaceX, the aerospace manufacturer founded by Elon Musk, has made a strong debut on the public stock market. In the week following its initial public offering (IPO), the company’s stock price increased by 14.9% from its closing price on the previous Friday. With a market capitalization of $2.43 trillion, SpaceX is now nearly as valuable as Amazon, one of the "Magnificent Seven" tech giants, and significantly more valuable than Bitcoin, which currently has a market cap of around $1.24 trillion.

This surge in value has caught the attention of Wall Street, with many investors showing excitement about the potential of SpaceX. However, Bitcoin, the leading cryptocurrency, has been experiencing a downturn. As of June 19, Bitcoin is down 28% year to date and only slightly above its multiyear lows from early June.

Despite this, some investors remain optimistic about Bitcoin's long-term potential. Trading at 130 times trailing sales, Bitcoin is seen as a speculative investment, but its current low price presents an opportunity for those looking to build a diversified portfolio. In fact, I recently increased my Bitcoin-based holdings by 23% in early June, adding to my investment in the Morgan Stanley Bitcoin Trust, an ETF with one of the lowest fees in the industry.

Why I Chose Bitcoin Over SpaceX

The decision to invest in Bitcoin rather than SpaceX was based on several factors. The Morgan Stanley Bitcoin Trust offers annual fees of just 0.14%, which is lower than other similar ETFs like the Franklin Templeton Digital Holdings Trust and the Bitwise Bitcoin ETF. This fee structure makes it an attractive option for investors seeking exposure to Bitcoin without incurring high costs.

Moreover, the crypto market appeared undervalued during that time, and it still does today. My total Bitcoin exposure, including actual Bitcoin and three spot-price ETFs, was initially at 3.8%. This is comfortably within the 1% to 5% range recommended by financial institutions like Morgan Stanley in 2024. After purchasing the Morgan Stanley ETF, my exposure increased to 4.7%, placing me near the top of the professionally recommended range.

While I’m not betting the proverbial farm on Bitcoin, I believe it should be taken seriously as part of a well-rounded investment strategy.

The Case for Bitcoin in a Changing Market

Although SpaceX has captured the imagination of many investors, its valuation is considered frothy by some analysts. Early investors are building a trillion-dollar enterprise based on rapid revenue growth and significant cash burn. The xAI segment, which involves data centers, is expensive to develop and operate, with limited financial returns for such an asset-heavy endeavor.

Rockets may be cool, but they don’t necessarily make for a solid investment thesis. A 130 price-to-sales ratio is not a sustainable metric for long-term growth. Meanwhile, Bitcoin is facing challenges, but it also presents opportunities. The current price of Bitcoin is below mining production costs, which means miners are operating at a loss. This situation could lead to two possible outcomes: either prices recover to restore profitability or miners exit the market, reducing new supply.

Fewer miners could lead to a decrease in the number of new Bitcoins entering circulation, which may eventually push prices higher. This dynamic creates a floor under Bitcoin's downside, making it an attractive long-term investment.

The Role of Major Banks in Bitcoin's Future

Major U.S. banks are increasingly recommending Bitcoin exposure for their wealth management clients. JPMorgan Chase, Citi, Morgan Stanley, and Bank of America have all started suggesting Bitcoin to their wealthiest customers. This shift indicates a growing acceptance of cryptocurrencies within the traditional banking sector.

As these institutions begin to embrace Bitcoin, it signals a broader change in the financial landscape. What was once considered a risky or volatile asset is now being viewed as a viable component of a diversified portfolio.

Should You Invest in Bitcoin Now?

Before investing in Bitcoin, it's essential to consider the current market conditions and your personal financial goals. While some analysts suggest that Bitcoin may not be the best choice right now, others see it as a long-term opportunity.

For example, the Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now. While Bitcoin wasn't among them, the list includes companies that have delivered substantial returns in the past. For instance, if you had invested $1,000 in Netflix when it was added to the list in December 2004, you would have over $417,000 today. Similarly, an investment in Nvidia at the time of its recommendation in April 2005 would have grown to over $1.2 million.

The Stock Advisor program has consistently outperformed the S&P 500, with an average return of 936% compared to 209% for the broader market. This track record highlights the potential for significant gains when selecting the right investments.