Tesla purchases $1.5B worth of bitcoin
Customers can buy cars with digital coin, whose prices reach $44,000
Bitcoin surged to an all-time high after Tesla Inc. said it’s invested $1.5 billion (U.S.), the biggest endorsement of the controversial cryptocurrency by a mainstream company.
The digital asset jumped as much as 16 per cent after Tesla made the disclosure in a regulatory filing, with prices exceeding $44,000 for the first time. Tesla also said it would begin accepting the digital token as a form of payment for its electric cars. Other coins surged as well. Ether gained as much as 11 per cent to a record and litecoin rallied a similar amount Monday in New York, according to data complied by Bloomberg. Cryptocurrencies trade 24-7.
That Tesla, one of the world’s most influential companies, and billionaire CEO Elon Musk have thrown their weight behind bitcoin can be seen as a key endorsement for the cryptocurrency, which has been criticized by policy-makers for facilitating money laundering and fraud.
“The world’s richest man allocating $1.5 billion of his company’s treasury to bitcoin speaks volumes about the magnitude at which crypto gains institutional adoption,” said Antoni Trenchev, managing partner and co-founder of Nexo in London. “Tesla has now paved the way.”
Trenchev said he expects that at least 10 per cent of S&P 500 companies will be invested in bitcoin by the end of 2022. Tesla is the only member of the benchmark equity index to disclose any purchase of the digital coin yet.
Tesla ended 2020 with more than $19 billion in cash on hand after having raised $12 billion in stock sales, taking advantage of a 678 per cent surge in its share price last year.
Part of the demand for those shares came from passive investors forced to buy after Tesla was added to the S&P 500 in December.
Some $11 trillion of investment assets are either tied or benchmarked to the S&P 500.
Musk has been coy about his endorsement of the cryptocurrency, adding — and then removing — #bitcoin from his Twitter page and seemingly making public endorsements for another digital token, dogecoin, which also hit a record Monday.
Musk is “putting Tesla’s money where his mouth is,” said Craig Erlam, senior market analyst at OANDA Europe in a phone interview.
“That’s obviously far more impactful in the longer term,” he said of Tesla’s purchase of bitcoin over Musk’s cryptic social media touts of digital assets.
“A company investing that level of money, in particular, very much adds to the validation of it as an investable asset,” Erlam said.