Elon Musk’s brainchild, Tesla Motors has revolutionized almost every aspect of the automotive industry. While Tesla’s sensational lineup of electric vehicles including the Tesla Model S has sent the automotive industry into an electrification juggernaut, the American automaker’s influence runs far beyond just electric vehicles. Revamping the car buying process, bringing new manufacturing techniques to the equation, merging car and technology- Tesla has done it all.
Further, the polarizing character of Elon Musk has sent the automotive world in waves each time he posts a tweet. This time Musk is under limelight again, as he bought a value of $1.5 billion in bitcoins! How does this move affect the world of cryptocurrency?
The onset of the announcement
Elon Musk’s Twitter handle is a hot hub to speculate the various changes coming to one of the world’s biggest automakers. This time Elon Musk raised a lot of eyebrows by posting a variety of positive messages, encouraging people to invest in cryptocurrencies like bitcoin.
Later, Tesla announced in February that it had purchased $1.5 billion in bitcoins. This is equivalent to a worth of 48000 bitcoins, back when the value of bitcoin was fluctuating between $30000 and $40000. Within a few minutes, the prices of bitcoin saw a surge of almost 14%.
As a result, the price of bitcoin skyrocketed to new all-time highs thanks to Tesla’s gigantic investment. Following Tesla’s announcement, the price of bitcoin stood at as high as $44200. The electric automaker’s shares also saw a surge of 2%.
The aftermath of Tesla’s announcement
Tesla’s controversial move paid enough dividends, as the automaker earned more than $1 billion from its bitcoin investment in a matter of just 10 weeks. The value of the bitcoin almost doubled in the space of 10 weeks. Just recently, the value hit an all-time high of $64663. At the time of writing this statement, Tesla’s bitcoin assets stood at a whopping estimate of more than $3 billion.
The automaker also recently announced that it would start accepting bitcoins from customers as a form of payment for its products. However, as an initial measure, Tesla will carry out this procedure only on a limited basis with the appropriate law protocols involved. CEO Elon Musk further stated in March that the bitcoins received as payment won’t be converted to fiat currency. Thus, Musk emphasized Tesla’s intentions of storing cryptocurrencies rather than converting them.
The state of bitcoin and other cryptocurrencies
Bitcoin first came into existence almost 12 years ago, providing the world a new means of simplifying trade and other financial processes. However, the underlying technology behind it restricted the maximum number of bitcoins that could exist to just 21 million.
Thus, the value of bitcoin follows the classical market philosophy of supply and demand. As more and more financial giants include bitcoins in their financial balance sheets, the finite supply gets depleted even more. Eventually, the prices skyrocket in the long term.
Elon Musk’s tweets also had a huge impact on the value of the new cryptocurrency, dogecoin. However, the volatile nature of these cryptocurrencies could be a challenge for every investor.
Still, big-time investors like Tesla have shown the world that cryptocurrencies are here to stay for the long term. Apart from Tesla, the payment platform firm Square and the software firm Microstrategy have also expressed their trust for cryptocurrencies. Microstrategy for its part is resolute in its goal to acquire more bitcoins, as the company now holds over 90000 of them.
What investors think of Tesla’s entry into the bitcoin market
Tesla’s entry as a bitcoin investor adds the American giant to the long list of companies that have already held stakes in the bitcoin market. This includes the likes of Apple, Microsoft, Saudi Aramco, Amazon, Google, and Facebook. For bitcoin investors, this rings in as good news as the price of bitcoin surged to record values. For those who are planning to invest some shares in bitcoins, they may have to wait a long time for its volatile price to get stable again.
Experts think that with these moves, Tesla looks set to appeal to customers who consider cryptocurrencies as a reliable source of transactions. Bitcoins will only grow more in significance over the next 10 years. Tesla’s futuristic thinking may inspire other automakers to take initiative as well. However, in its Stock and Exchange Commission filing, Tesla expressed its concern to other investors about the volatility of bitcoin.
Musk also came under fire in 2018, when the SEC charged him with fraud for his market-moving tweets. He had earlier tweeted about taking the company private at $420 per share. Musk had to pay a $20 million fine to settle with the SEC. He also had to give up his chairman role on Tesla’s board, as the company had to incur another $20 million fine.
Digital currencies are the thing of the future. Keeping this in mind, Tesla opened its doors for customers to purchase a Tesla with bitcoins. Tesla states in its SEC filing that investing in bitcoins has brought more flexibility to the table and has helped them to further diversify and maximize returns on their cash. Tesla’s move may spike further interest from other automakers, which will make cryptocurrencies an essential part of transactions in the future.