Tesla buys $1.5 billion in bitcoin, sending it to all-time high
Bitcoin surged to an all-time high Monday after Tesla said it bought $1.5 billion worth of the cryptocurrency.
The digital coin climbed 16 percent from a day earlier to a record of $44,801.87 after Elon Musk’s electric-car maker revealed the hefty investment in a regulatory filing.
Tesla also said it expects to start taking bitcoin as payment for its products “in the near future,” adding that it could liquidate any crypto payments it receives.
Musk himself endorsed bitcoin last week, saying it’s “on the verge of getting broad acceptance by conventional finance people.”
“I’m late to the party but I’m a supporter of bitcoin,” he said on the Clubhouse audio-chat app, according to CNet.
Nevertheless, Tesla’s Monday announcement also drew skeptics, who noted that bitcoin is an unusually risky way for Tesla to spend cash on its corporate balance sheet.
“Bitcoin is yet another gimmick to lure more unsuspecting investors into gambling on Tesla’s stock,” said David Trainer, CEO of the investment-research firm New Constructs. “Tesla’s move to purchase $1.5 billion worth of Bitcoin is not a smart allocation of capital for a company that has burned billions of dollars over the past few years.”
Indeed, Tesla’s announcement did more for bitcoin on Monday than it did for the company’s shares, which rose as much as 3 percent on the news and were recently up about 1.4 percent at $864.01.
Tesla said it bought bitcoin after tweaking its investment policy last month to “further diversify and maximize returns” on cash that isn’t essential to its operating liquidity.
But the world’s most valuable automaker noted that its new cryptocurrency holdings come with several risks, including the wild price swings that have been a major feature of bitcoin’s relatively short history.
“The prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable,” Tesla said in its filing with the Securities and Exchange Commission.
“Moreover, their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.”
Musk first mused about getting Tesla into the bitcoin market in a December Twitter exchange with MicroStrategy CEO Michael Saylor, whose business-intelligence firm bought more than $1 billion worth of the digital currency last year.
The surprise announcement was the latest sign of bitcoin’s growing support among companies and institutional investors, a trend that’s helped drive up its price in recent months.
Wedbush Securities analyst Daniel Ives said the move could boost Tesla’s stock price as investors incorporate the company’s exposure to cryptocurrency into its overall valuation.
“Ultimately, investors and other industry watchers will be watching this closely to see if other corporations follow the lead of Tesla on this crypto path,” Ives wrote in a research note.