Sunday, Elon Musk tweeted, ” Who Let the Doge Out?”, and it suddenly bounced Dogecoin to the eighth-most valuable cryptocurrency. Today, Tesla, co-founded by Elon Musk, confirmed that it bought bitcoins worth $1.5 billion. As soon as this news came into the public domain, Bitcoin value surged 16% to the all-time high of $44795. Tesla share also saw a growth of 2%.
Tesla Invests in Cryptocurrency
In a filing with the Securities and Exchange Commission(SEC), Tesla disclosed that it has bought Bitcoin worth $1.5 billion in January. Tesla also announced that the company will start accepting cryptocurrency as a form of payment to sell its electric vehicles. This announcement makes Tesla the first automobile company to accept payment in the form of cryptocurrency.
The company further revealed that from January onward, the company has changed its policy to provide us more flexibility and modify returns on cash.
From December 2021, Elon Musk is continuously tweeting about the importance of cryptocurrencies in the current digital era. He called Bitcoin the future of cryptocurrencies. On the other hand, his tweet meme related to Dogecoin brought exponential growth in the value of Dogecoin’s cryptocurrency. The value of a Dogecoin surged from half a cent to 8 cents. Currently, Dogecoin’s market capitalization is worth $10 billion.
Tesla’s investment in cryptocurrency also shows the wide acceptance of the new financial alternative. Tesla is the largest company that invested in Cryptocurrency.
Square, a payment processing platform, and Microstrategy, a Business Intelligence software provider also invested in cryptocurrency. PayPal also allowed its customers to buy, sell, and exchange cryptocurrencies recently.
In its fourth-quarter earnings report, Tesla said that it has cash and cash equivalents of $19.4 billion.
The Tesla filing went on to say, “We may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds, and other assets as specified in the future.”
Analysts Perspectives on Tesla Move and the Risk Associated with Cryptocurrencies
Financial analysts believe that Tesla’s investment in Cryptocurrency is a game-changer. This decision may bring cryptocurrencies globally on board for transaction purposes.
Some analysts believe that Tesla never shies away from publicity. So, it may be one of the intelligent marketing moves by Musk owned Tesla. It was one of the masterstrokes to increase the share value of Tesla. Others have different opinions. They think that investing $1.5 billion in publicity is too big to believe.
Some analysts consider it a market manipulation since Elon Musk added Bitcoin in its Twitter bio on January 29.
Tesla also understands the risk associated with Cryptocurrencies. Some analysts also believe that bitcoin has the potential to replace gold as an investment option.
In its SEC filing, Tesla said that central bodies or government authorities do not control cryptocurrencies, so it has some risk associated with these kinds of intangible assets.
Tesla further told that Cyberattacks, computer malfunction, forgetting passwords to access cryptocurrencies, hacking, or other malicious activities may result in the loss or destruction of private keys to access such assets.
With those risks in mind, Tesla said that when it eventually accepts bitcoin as a form of payment for its products, it may or may not liquidate it upon receipt, according to the filing.
Now, it will be interesting to see how Bitcoin and other cryptocurrencies are accepted globally. Will the world accept them as one of the alternate modes of payment? Will cryptocurrencies face difficulties in the future due to their volatile nature?
India is already bringing a bill to ban all types of cryptocurrencies. Will the world follows India or India will change its stand to adopt cryptocurrencies. Being the second largest digital market, a lot may depend on India’s decision on cryptocurrencies.