Tesla’s Bitcoin Purchase Boosts Bitcoin Price
Bitcoin reached a historic peak after Tesla said it invested $ 1.5 billion in the currency, the largest ever made by a traditional company to date. The digital asset rose 16 percent after Tesla made the disclosure in a regulatory process, with prices in excess of $ 44,000 for the first time.
Tesla also said it would start accepting the digital token as a form of payment for its electric cars. Other currencies also rose. Ethereum gained 11 percent and Litecoin recovered a similar amount on Monday, according to data compiled by Bloomberg.
The fact that Tesla, one of the most influential companies in the world, and billionaire Elon Musk bet on Bitcoin, can be seen as a fundamental endorsement for cryptocurrency, which has been criticized by lawmakers for facilitating money laundering and fraud.
“The richest man in the world, allocating $ 1.5 billion of his company’s treasure to Bitcoin, says a lot about the magnitude with which cryptocurrency gains institutional adoption,” said Antoni Trenchev, managing partner and co-founder of Nexo in London .
“Tesla has now paved the way.”
Trenchev said he expected at least 10 percent of S&P 500 companies to be invested in Bitcoin by the end of 2022. Tesla is the only member of the benchmark stock index to disclose any purchase of the digital currency to date.
Tesla ended 2020 with more than $ 19 billion in cash after raising $ 12 billion in stock sales, taking advantage of a 678% increase in its share price last year. Part of the demand for these shares came from passive investors forced to buy after the Tesla was added to the S&P 500 in December. About $ 11 trillion in investment assets are linked to or compared to the S&P 500.
Musk has been shy about his cryptocurrency endorsement, adding – and then removing – #bitcoin from his Twitter page and apparently making public endorsements for another digital token, Dogecoin, which also hit a record on Monday.
Musk is “putting Tesla’s money where his mouth is,” said Craig Erlam, senior market analyst at OANDA Europe.
“This is obviously much more impactful in the long run,” he said of Tesla’s purchase of Bitcoin.
“A company that invests that level of money, in particular, contributes a lot to validating it as an investable asset,” said Erlam.
The move follows a similar investment from MicroStrategy CEO Michael Saylor. His company issued $ 650 million in convertible bonds – although the prospectus explicitly mentioned that the money would be used to buy Bitcoin. Saylor became a BTC evangelist, recently holding a webinar on how corporate treasurers should move some money into digital currency. MicroStrategy spent about $ 3 billion on the cryptocurrency.
Other companies have made similar investments in Bitcoin. In October, Square, headed by former cryptocurrency defender Jack Dorsey, announced that it had converted about $ 50 million of its total assets in the second quarter of 2020 to BTC. Crypto-miners such as Argo Blockchain and Marathon Patent Group also reported the purchase of the asset. Proselytists like Bill Miller of Miller Value Partners said this was just the beginning of what would certainly be a trend on Main Street.
Bitcoin’s journey to a record was marked by large swings that continue to fuel uncertainty about its outlook. Some see speculators at work and an inevitable bubble bursting. Others cite high-profile supporters and the interest of long-term investors as evidence of a more lasting recovery.
Although Tesla has announced plans to accept Bitcoin for purchases, almost no one uses cryptocurrency for anything other than speculation. Data from Chainalysis, a blockchain researcher from New York, showed that only 1.3% of economic transactions came from traders in the first four months of 2019.
The predictions for the possible long-term price range of Bitcoin is $ 400,000. The token is designed to have a fixed supply of 21 million coins, supported by a digital ledger distributed over computer networks. Erlam said in a note on Monday that Bitcoin may soon be looking at $ 50,000 in Tesla news.