Elon Musk has launched a pair of potential gamechanging shifts for bitcoin after Tesla invested $1.5 billion and said it will start accepting the cryptocurrency as payment for its cars in the near future.
Bitcoin’s price surged 10 percent to a record-high of $44,000 soon after Tesla’s disclosure on Monday morning. Shares of Tesla were up 1.8 percent off the back of the announcement in early morning trading.
Tesla’s announcement, which was buried deep in a US Securities and Exchange Commission filing, follows several social media posts by Musk that have sent the currency and other assets, including meme-based digital currency dogecoin, higher in recent weeks.
It came just days after Musk, who is a well-known supporter of bitcoin, briefly changed the bio of his Twitter account, which has 46 million followers, to say ‘#bitcoin’.
Tesla has invested around $1.5 billion in bitcoin and says it will start accepting payment for its cars and other products with it in the near future
Bitcoin’s price surged 10 percent to a record-high of $44,000 soon after Tesla’s disclosure on Monday
A well-known supporter of cryptocurrencies, Musk has weighed in regularly to the past month’s frenzy in retail investment, also driving up prices of the meme-based digital currency dogecoin and shares of U.S. video game chain GameStop.
Musk said a week ago that bitcoin was ‘on the verge’ of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency.
‘He’s now putting his money (shareholders’) where his mouth is,’ Markets.com analyst Neil Wilson said. ‘But given his recent comments – and adding #Bitcoin to his Twitter bio on January 29th – it also raises a real question about possible market manipulation.’
Tesla said the decision was part of its broad investment policy as a company and was aimed at diversifying and maximizing its returns on cash.
It said it had invested an aggregate $1.5 billion in bitcoin under the changed policy and could ‘acquire and hold digital assets from time to time or long-term’.
‘In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash,’ Tesla said in announcing the $1.5 billion investment.
As a result ‘we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.’
Tesla will also ‘begin accepting bitcoin as a form of payment for our products in the near future,’ the company added.
Tesla’s announcement, which was made in a US Securities and Exchange Commission filing, came just days after Musk briefly changed his Twitter bio to simply read ‘#bitcoin’
Musk said a week ago that bitcoin was ‘on the verge’ of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency
Analysts said it could help accelerate a move for bitcoin move towards the mainstream that has seen both Paypal, also co-founded by Musk, and huge global money manager BlackRock move to accept the currency.
Eric Turner, vice president of market intelligence at cryptocurrency research and data firm Messari, said: ‘I think we will see an acceleration of companies looking to allocate to Bitcoin now that Tesla has made the first move.
‘One of the largest companies in the world now owns Bitcoin and by extension, every investor that owns Tesla (or even just an S&P 500 fund) has exposure to it as well.’
Bitcoin, which has set new record highs in recent months after a rollercoaster ride over the past decade, has also drawn support from major financial institutions this year. The world’s biggest money manager Blackrock recently changed a handful of investment mandates to allow some of its funds to invest in the currency.
Central banks remain skeptical of digital currencies, but analysts say the more real world uses appear for bitcoin, the more attractive it will prove as a long term store of value.
Musk has also recently endorsed other cryptocurrencies, including dogecoin, the coin based on a popular internet meme.
Musk gave dogecoin a shoutout on Twitter last week sending its price to record highs over the weekend.
Musk said a week ago that bitcoin was ‘on the verge’ of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency
Late on Sunday, in a fresh endorsement for the cypto currency, Musk tweeted ‘Who let the Doge Out’ – mimicking lines from the famous song by Baha Men from the year 2000.
The coin has also received attention from California rapper Snoop Dogg by putting up an image of a dog tagged ‘Snoop Doge’ on his Twitter timeline.
Dogecoin was created largely as a satirical critique of the 2013 crypto frenzy and is not taken as seriously as bitcoin or ethereum. It almost doubled since Friday hitting a record $0.0871, according to data on blockchain and cryptocurrency website Coindesk.
Tesla is the latest corporate to add bitcoin to its treasury following similar moves by Square Inc, the payments company led by Twitter Inc chief Jack Dorsey and U.S. software firm MicroStrategy Inc.
In December, Musk had asked about the possibility of converting “large transactions” of Tesla balance sheet into bitcoin on Twitter. Michael Saylor, Microstrategy’s CEO had suggested the billionaire make the move.
PayPal said in October that it would allow customers to buy, sell and hold bitcoin and other virtual coins using its online wallets. It remains to be seen whether bitcoin will see greater adoption as a form of payment, something that it has traditionally struggled to achieve.
“I think a lot of institutions and corporates who thought the Saylor move was curious might actually see the upside in taking a small hedge on bitcoin for better returns than any other fiat yield in 2021 and follow,” said Maya Zehavi, a blockchain consultant.
“If this becomes a trend in corporate treasuries the downside of staying on the sidelines will only become costlier over time.”