Should You Invest in Bitcoin? Here's What Bill Gates Thinks

The man who saw the potential in the internet is skeptical about Bitcoin.

It isn't surprising that people want to know what Bill Gates has to say about Bitcoin (BTC). Not only is Gates one of the richest men in the world, but the nascent cryptocurrency industry is also frequently compared to the early days of the internet.

However, the man who was among the first tech CEOs to recognize the promise of the internet is at best neutral on Bitcoin and at worst critical. Gates is concerned about the environmental impact of the world's biggest cryptocurrency and worries some investors could lose their money.

What Bill Gates thinks about Bitcoin

Back in 2018, Bill Gates told CNBC, "It's kind of a pure 'greater fool theory' type of investment." The idea here is that the only value Bitcoin has is if you're able to sell it to someone else for more than you paid; it doesn't do anything in and of itself. At that point, Gates said he had been given some Bitcoin as a birthday present, but he'd sold it a few years later.

By February 2021, his views had softened slightly. "I don't own Bitcoin, I'm not short Bitcoin, so I've taken a neutral view," he said in an interview. However, he continues to be worried about the environmental cost of Bitcoin mining. Speaking in a Clubhouse interview later that year, Gates said, "Bitcoin uses more electricity per transaction than any other method known to mankind."

The philanthropist's concerns about Bitcoin's energy consumption are justified. Digiconomist, a website that tracks the environmental impact of crypto, showed Bitcoin's carbon footprint is about the same size as that of the Czech Republic. Its annual energy consumption is about the same as Thailand.

Gates is also concerned that individual investors could get hurt. In an interview with Bloomberg, he touched on Elon Musk's passion for crypto. "Elon has tons of money, and he's very sophisticated, so I don't worry that his Bitcoin will randomly go up or down." he said. But Gates worries that people who don't have as much money to spare might not cope so well with the volatility. "My general thought would be that if you have less money than Elon, you should probably watch out," he said.

Gates is not totally negative on the industry as a whole. He says the Gates Foundation used digital currencies to efficiently get money to those in need during the pandemic. "Digital money is a good thing," he said. Gates advocates a different -- more attributed -- approach to digital assets. He says there are ways of benefitting from low-cost transactions without risking involvement in money laundering or financing terrorism.

Should you invest in Bitcoin?

Bill Gates raises some legitimate concerns that every crypto investor should be aware of. For starters, if you're an environmentally conscious investor, you should know it is almost impossible to buy a green Bitcoin. When you buy Bitcoin, you don't know whether the coin -- or fraction of a coin -- you bought has been powered by renewable or coal-fired electricity.

That said, many other cryptocurrencies use a different model to validate transactions, so they don't use anywhere near as much energy as Bitcoin. But mining Bitcoin is not environmentally friendly, even if some companies are mitigating the damage by using renewables.

It's also true that billionaire investors like Elon Musk are less likely to be impacted by significant price drops. Cryptocurrency investments can produce considerable rewards, but they can also be extremely risky. This is one reason to only spend money you can afford to lose if you decide to invest in Bitcoin.

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On that note, it's also a good idea to first get on top of your other financial goals. For example, crypto investments should not take priority over paying down debt or building up your retirement savings. If you don't have an emergency fund to cover three to six months of living expenses, take the time to build one before you do anything else. That way, you won't be forced to sell your crypto or other investments in the event of an unexpected financial crisis.

Ultimately, the decision to invest in crypto comes down to a mix of your personal financial situation and investment goals, your belief about how crypto might perform in the long term, and your tolerance for risk. What's right for one person is not necessarily right for everybody. For example, Bill Gates has already amassed a considerable fortune and -- like Elon Musk -- he's in a different financial situation from you and me.