Musk reveals Tesla and SpaceX are facing significant raw material inflation, chats with MicroStrategy CEO about Bitcoin: Won't sell

Tesla CEO Musk shared a Financial Times report, stating that they too are feeling the impact of severe inflation in raw materials and logistics, and he also expressed doubts about the inflation rate in the coming years. More importantly, he mentioned that they will continue to hold Bitcoin for the long term.

Commodity Prices Hit New High Since 2008

The Standard & Poor's Goldman Sachs Commodity Index (GSCI) used to measure global raw material prices is currently at its highest point since 2008, with the potential to see the largest increase since the 1970s this week. The market attributes this to widespread abnormal fluctuations in commodities triggered by the Ukraine conflict.

Last week, U.S. oil prices hit their highest point since 2008, while European natural gas, Chicago wheat futures, aluminum, coal, and other commodity prices surged, which will have significant impacts on global businesses and consumers. The Financial Times believes this will lead to an increase in inflation to a level that central banks find difficult to control, resulting in higher global living costs.

Morgan Stanley analyst Dominic O’Kane believes that the commodity market volatility sparked by the Russia-Ukraine events will have a structural impact on long-term supply. The disruption to demand is evident with the soaring prices.

The Double-Edged Sword of International Sanctions on Russia

Russia is a major global supplier of oil, natural gas, metals, media, and grains. While the West has not imposed sanctions on natural resources, the resistance from banks, insurance companies, shipping companies, and trade partners is creating compliance and reputational risks for the country. Demand for Russian oil is decreasing as buyers seek alternative sources. As the cost of driving economic growth becomes increasingly high after the pandemic eases and demand rises, this rebound is expected to trigger a series of inflationary pressures, according to MUFG research director Ehsan Khoman.

MicroStrategy CEO Response: Bitcoin Will Strengthen

MicroStrategy CEO Michael Saylor stated that the U.S. Consumer Price Index will continue to break new records, leading to higher asset inflation. Weaker currencies will collapse, and cash, bonds, and value stocks will flow into scarce assets like Bitcoin, strengthening it.

In response to Michael Saylor, Elon Musk tweeted, "I knew you would come to that conclusion." Musk advised people, "When inflation happens, you're better off owning some real assets like real estate or stocks in companies that you think produce good products rather than cash."

His final words are likely to be a favorite among the cryptocurrency community:

I still hold and won't sell my Bitcoin, Ethereum, and Dogecoin, FWIW For What It’s Worth, regardless.