PALO ALTO (California): Tesla Inc said on Monday it had invested around US$1.5bil in bitcoin and expected to begin accepting payment for its cars and other products with it in the near future, prompting a more than 10% jump in the electronic currency.
Analysts said the move by one of the world’s best-known companies was liable to prove a game changer for bitcoin.
The worlds largest crypto currency was up 14% in late trade, setting a new record high above US$44,000.
The Grayscale Bitcoin Trust rose 20.6%, its highest since mid January. Gold jumped more than 1% while ethereum, another cryptocurrency, surged to a record high.
New York's JMP Securities equity research analyst Devin Ryan said:
“Today’s announcement that Tesla ... has purchased US$1.5bil of bitcoin for its balance sheet in advance of allowing customer payments in bitcoin is bullish for several reasons.
"It ties the crypto asset class to a nearly trillion dollar and highly visible company that we are confident put substantial resources into vetting the decision and structure (and after its analysis, was confident moving forward).
"We also believe this will spark other companies (private and public) to explore Tesla’s decision and determine whether they should look to do something similar.
"Simply put, Tesla’s decision de-risks the decision for other companies, which could reasonably open the door for more corporate adoption.
"MicroStrategy ..., which has been a pioneer in purchasing bitcoin for its firm treasury account as a public company, held a virtual event last week which discussed their decision and process for entering the bitcoin space and gave a blueprint for other companies to think about making similar decisions.”
Pennsylvania's SEI Investments CIO of non-traditional strategies Jim Smigiel said:
“Ironically, wider acceptance of these technologies may require more centralization and third-party verification, which would cause them to become more similar to the systems they were designed to replace.
“The cryptocurrency market is just beginning to mature and the supportive value of digital coins remains difficult to price.
“We view them as highly speculative instruments, which makes them an unsuitable investment choice for pursuing important financial life goals — particularly for investors who can’t afford the high risk of permanently losing money.”
New York's Great Hill Capital LLC managing member Thomas Hayes said:
“It’s saying that Elon Musk believes that buying Bitcoin will grow faster and generate a better return for his shareholders than buying Tesla stock. In my view it’s not a tremendous vote of confidence in Tesla stock.
“Now, he may see what MicroStrategy did and the market started to play the MicroStrategy stock as a proxy for Bitcoin and it attracted flows so there might be a clever play like that.
“It’s a huge vote of confidence for Bitcoin there’s no question about that because now other companies will start to look at if Tesla is doing it, should we allocate some of our cash into bitcoin?
“If any lesser mortals had made the decision to put part of their balance sheet in Bitcoin I don’t think it would have been taken seriously.
“But when the richest man in the world does it everyone has to take a second look there’s no question about it.”
