Tesla relies on bitcoin and converts the cryptocurrency
Tesla has announced that it has invested $ 1.5 billion in bitcoin, and has signalled its intention to start accepting cryptocurrency as a payment method for its electric cars. The news sent bitcoin’s price to a new record, as the market voted confidence in the leader in the production of electric cars. Elon Musk’s company said on Monday that it was betting on bitcoin after updating its investment policy last month to buy digital assets.
“We expect to start accepting bitcoin as a form of payment for our products soon, subject to applicable laws and initially on a limited basis,” Tesla said in a statement to the Securities and Exchange Commission. The company’s adoption of bitcoin increases the legitimacy of e-currencies, which have become a significant asset in recent years, despite some Bloomberg notes’ scepticism.
The company’s investment also matches Musk’s impressive image, which improved the automotive industry with electric vehicles’ production and managed to put the company’s shares in the S&P 500 index on blue chips last year.
Tesla turned to the digital currency after it tripled its price last year. The cryptocurrency rose 16 per cent to a new record of $ 44,795 at the start of trading before falling to just over $ 43,000.
Musk often tweeted about cryptocurrency issues, and earlier this month called bitcoin a “good thing.” Another cryptocurrency, Dogecoin, reached a record on Monday after Musk, rapper Snoop Dogg and Kiss bassist Jean Simmons tweeted about it. Musk has been flirting with bitcoin for years and posted an impressive image on Twitter in December showing that the cryptocurrency symbol tempted him.
A symbolic solution
He also discussed targeting “big transactions” from Tesla’s bitcoin balance on Twitter with Michael Sailor, CEO of MicroStrategy, who is a prominent supporter of the digital currency. In a series of tweets, Sailor called on the billionaire to transfer dollars from the electric car maker to bitcoin and “do a $ 100 billion service to its shareholders.” MicroStrategy issued convertible bonds worth $ 650 million last year with the explicit condition of using the money to buy bitcoins.
The investment is only a small part of Tesla’s cash reserves, but it is committed to a variable asset class that few other Tesla-sized businesses have made. The company said its revised investment policy also allows it to invest in gold bullion and exchange-traded funds.
“Tesla is hardly considered a traditional company, but when one of the world’s largest companies starts holding bitcoin in its balance sheet as a substitute for cash, the market notices this,” wrote Paul Hickey of Bespoke Investment Group in a note to customers.
Shares of Tesla rose slightly on Monday. The company ended 2020 with more than $ 19 billion in cash after raising $ 12 billion from stock sales, taking advantage of a nearly 750 per cent jump in the price of its stock last year. Part of the demand for these shares comes from passive investors forced to buy after Tesla added to the S&P 500 on December 21.
According to him, investors will ask themselves whether this $ 1.5 billion is a significant amount for Tesla. The company raised money last year after selling shares, but O’Rourke said $ 1.5 billion was a significant investment because digital assets were too volatile.