The world’s largest car manufacturer has invested in a lot of bitcoin, but will it soon accept it as payment too?
Feb. 9, 2021
What happens when an unstoppable force meets an immovable object? Well, sometimes they join forces and form an undisputed hype train supreme.
Tesla (NASDAQ: TSLA) is that unstoppable force, confirming yesterday that it had acquired $1.5 billion worth in Bitcoin, the immovable object. Of course, the news sent Bitcoin above $40,000 once more, while Tesla stock enjoyed its own bump.
What does this mean though?
It means that Elon Musk is taking a big, albeit potentially profitable risk.
This is a rather unprecedented situation for a manufacturing company, but Tesla and its eccentric CEO have never been ones to take the beaten path. With a number of successively profitable quarters on hand, S&P 500 inclusion, a ride-or-die following, as well as $19 billion in cash and equivalents as of its most recent filing, Tesla can likely afford to make this risky investment.
But the danger of Bitcoin’s volatility remains,
In 2013, for example, it started at around $13 and spiked to over $1,000 by December. In 2017, it went from about $1,000 to around $20,000. In early 2020, it had sunk below $4,000 at one point before its dizzying rise to nearly $45,000 yesterday.
On the other hand, such a large investment could very quickly become very valuable, helping Tesla to maintain its status as a profitable company. After all, many Bitcoin bulls see the currency eventually hitting $150,000.
Either way, the move is a game-changer and could be the catalyst for other big companies to move into Bitcoin. Also, by extension, every investor that owns Tesla (or even just an S&P 500 fund) has exposure to Bitcoin now as well.
For a more in-depth look at this, read our blog post here.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.