Why Tesla and Elon Musk Invested $1.5 billion in Bitcoin
Tesla and Elon Musk have invested billions in Bitcoin recently. But the real question observers have been asking is why are they doing this?
Tesla Inc. has pointed to the increasing acceptability of the digital asset and become the latest major corporation investing in Bitcoin recently. But the real question observers have been asking is why are they doing this?
Last week, Elon Musk has sparked the first light of his recent move during his conversation on ClubHouse, actually. He also didn’t run late to prove his seriousness, obviously.
You can now buy Tesla with your Bitcoin!
Tesla has announced to the public that it purchased $1.5 billion of Bitcoin on Monday. So this also means that it will begin accepting payment in the cryptocurrency for its products in the future. Also their stock already 100% gains in less than 3 months.
On the other hand, Bitcoin seems a variable asset which prone to sharp value variables. So some finance professionals described Tesla’s announcement of Bitcoin as an unnecessary risk. It’s mostly because it depends on how Bitcoin classified, it might actually harm the vehicle maker’s balance sheet in the form of currency or a commodity.
Elon Musk also shared a tweet about Bitcoin and other cryptocurrencies.
Frodo was the underdoge,
All thought he would fail,
Himself most of all. pic.twitter.com/zGxJFDzzrM— Elon Musk (@elonmusk) February 11, 2021
At this point, why Elon Musk and his corporation have chosen the possible risk of owning Bitcoin. So, why the revolutionary has collimated itself with cryptocurrency might be because of those reasons down below.
Publicity stunt?
Craig Erlam, senior market analyst at Oanda wrote a research note on Tuesday. Erlam described this move as a publicity stunt which supposed to make everybody talking about it and take their attraction.
“Thankfully, Elon Musk on Monday once again ensured no one would be bored, with the unexpected announcement that Tesla will buy bitcoin and accept them as payment for vehicles.”
Diversification
Tesla made a statement to the Securities and Exchange Commission to clarify Bitcoin is a chance for a variation to cash and cash-equivalent assets. Most of the time, corporations keep cash or cash-equivalents so they can provide operational liquidity and create returns while limiting risks.
Tesla wrote in order to explain itself more that,
“We updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.”
Tesla also aware that their move has risks such as the price of bitcoin could slump.
Brand management
A group of founders has already attempted to break the mold of payments and fiat money. This is also how cryptocurrencies occurred in the first place. They were written by someone or someones known as Satoshi Nakamoto.
Somehow, those revolutionary ideas overlap with Musk’s agenda. For example, Tesla makes electric-powered vehicles in a world dominated by fossil-fuel-driven cars for years. Furthermore, Tesla’s direct-to-customer sales model also sets a trend besides other companies that are selling their cars through unaffiliated dealerships.
So if we consider all of these, being decentralized assets and not controlled by no one else seems the features Bitcoin and Tesla have in common overlappingly.
Elon Musk who CEO also invested after PayPal
Tesla’s CEO invested most of the $22 million he earned from internet sales. So he made a new startup for the internet business X.com, which PayPal Holdings became about 20 years ago. PayPal is one of the pioneers of the Bitcoin revolution at the moment. It opened up its cryptocurrency platform to all U.S customers back in November after they gave a narrower presentation.
So, Tesla and Elon Musk might be one of the biggest passing into the cryptocurrencies. But on the other hand, there is a growing group of investors that starts to see variable digital-ledger-backed cryptos as a true asset.
The researcher, along with fellow analyst Brian McKenna, said,
“They believe the building ‘network effect’ around bitcoin is moving the broader crypto asset class into the mainstream, and with many hundreds of billions of dollars of value in infrastructure supporting the asset class, we see the already substantial (and growing) vested interest in its success as bullish for the industry.”
Once and for all, here is Elon Musk’s conversation he made on ClubHouse about cryptocurrencies and more.
