Tesla has disrupted the tech world again by investing $1.5 billion in Bitcoin. Founder Elon Musk decided to make the move after his electric car company continued their fantastic results over the COVID-19 period.
The Electric Vehicle (EV) market is expected to reach 26 million units in 2030 at a 21% CAGR with the help of Elon’s car company. Following the news of Teslas investment, Bitcoin reached a record high price of $49,000. The story went viral quickly, after an SEC filing was announced by the company last week.
But what was the biggest takeaway from this story? Why is Elon Musk getting involved with a decentralised digital asset when most of the central banks fail to even recognise the value of the currency?
Starting from 2008, Bitcoin has made an exciting journey in the alternative assets world as a pioneer. Bitcoin was considered equivilent to gold by many investors while others found it as an extremely risky venture.
Bitcoin caught the mass attention when it broke the $10,000 level in 2017. Many investors started to study the cryptocoin market and questioned the potential of this currency since Bitcoin had no underlying asset to back it up.
But things continued to improve for Bitcoin as it broke the $10,000 level again in 2020, after a massive coronavirus pandemic selloff of more typical market assets in March 2020. Investors who then used these funds to buy Bitcoin at the beginning of 2020 gained 40% in May, higher than many regulated markets at the same time.
The constant price surge of Bitcoin made investors think that it might reach the $100,000 level very soon.
Elon Musk has been known for notoriously promoting digital assets on his twitter feed. He recently joked about Dogecoin with his 46 million Twitter followers, which inflated the price of the token.
Things got more interesting when Elon put the hashtag bitcoin in his twitter bio. Many of his followers started to talk about Bitcoin as soon as they found the world’s second richest person tweeting the alternative asset in his social media account.
Instantly, fans started to think that Tesla and Elon might join the crypocurreny community. However, some projections were made against Bitcoin where people were saying “why would a car company invest in digital currencies?”
This made a bigger buzz across the entire cryptocurrency twitter. People started to bet on Bitcoin as it was already having an upward movement in 2020.
On 8 February 2021, finally Tesla’s Bitcoin investment news went public at a time when China is threatening a Bitcoin takeover. Unfortunately, Americans failed to gain a considerable advantage over China on the digital asset matter in the last few years.
Among the top American personalities, only Elon Musk and Jack Dorsey showed interest in the blockchain-based currency.
But Tesla was the first major company to disclose Bitcoin purchases in its Annual report. The news also covered the interest of Tesla to accept Bitcoin as a payment method in the future. Hence, we can predict that a change is coming up soon in the digital asset world.
When Elon Musk publicly criticised the central banks for easing up the monetary policy, it was not clear that his company will go for the digital tokens as an alternative to cash in the future.
But eventually Tesla used its massive $19.4 billion cash and equivalents reserve to bet on Bitcoin, making it the most desirable asset on our planet right now.
Tesla announced in a statement that it wants more flexibility to diversify and get maximum returns on its cash. Hence, the company decided to invest in Bitcoin.
Moreover, Tesla will become the first car maker in history to accept Bitcoin payments from the consumers. These are great statements considering the reputation of the company as a top electric vehicle maker.
But if we look at the past, we might see some troubled events before the Tesla Bitcoin deal. Tesla and Elon Musk both have to pay $20 million each in fines after a twitter posted by Mr. Musk in 2018.
SEC also forced Elon to step down as a chairman after the incident. This made Elon Musk consult Tesla lawyers before posting any company finances to the public on Twitter.
On the other hand, understanding the value of the digital asset, two prominent companies, Square and Microstrategy decided to invest $50 million and $1 billion in Bitcoin respectively. These companies are not Bitcoin companies, rather they are payment solutions and business intelligence providers making a move in the alternative asset world.
Already the Microstrategy balance sheet is showing that its Bitcoin holding made a $2 billion gain over the actual $1 billion investment. Even the insurance giant MassMutual invested $100 million considering the future of Bitcoin.
All of these companies driving towards alternative currencies validate the effort of Tesla to be the early mover in the digital currency industry.
Looking at the cash and marketable securities held by top American companies we can say that Bitcoin might see more billion dollar investments in the future. Both Apple and Microsoft have $190 billion and $137 billion in cash but they are more conservative in moving cash to alternative forms of investment. Other companies like Twitter might think about investing in such assets soon as the CEO Jack Dorsey already expressed his interest in Bitcoin.
This should be good news for the founder of Bitcoin (Satoshi Nakamoto) as he wanted to make the currency as the global solution for payments. If more companies like Amazon, Google and Facebook support Bitcoin payment then it will become a globally accepted digital currency despite being one of the most volatile assets in the world.
Analysts are predicting that the Bitcoin Treasuries list will grow exponentially in 2022 and 2023 thanks to the viral Tesla Bitcoin investment news. As a result, we might see local shops and small companies accepting Bitcoin more often in the future.
The recent rise in Bitcoin prices might be influenced by Elon Musk’s Twitter hashtag and positive messages before the billion dollar investment but this also laid the foundation for a mass support of Bitcoin in a world where currencies are dominated by central authorities.