Reportedly, electric car maker Tesla (TSLA) has invested $1.5B in Bitcoin and will also soon start accepting payments for its cars in Bitcoin “subject to applicable laws and initially on a limited basis,” making it the first S&P 500 company to invest in Bitcoin. Last month, a change in investment policy led the brand to include “more flexibility to further diversify and maximize returns” for cash not needed for operations.
Tesla stood at $19.38 billion in cash and cash equivalents on its books at the end of 2020. Other corporates like payments company Square, Inc. (SQ) purchased 4,709 at an average purchase price of $50 million last October, leading to 1% of the total assets on its balance sheet. Business intelligence platform MicroStrategy Incorporated invested $1.3B of its cash holdings into Bitcoin last year as part of a change in its treasury management policy and helping pump MicroStrategy’s stock price to new highs.
Tesla’s announcement drove the cryptocurrency to a new record, touching almost $44k on the day of the announcement. However, keeping in mind the volatility of cryptocurrency markets Bitcoin price swings generating profitable returns in a short period, but can also crash valuations quickly. However, Tesla’s investment can be argued as a safe move since it only represents less than 1% of the $52.1 billion of total assets on its balance sheet at the end of 2020.
Tesla CEO Elon Musk, the world’s richest person has frequently tweeted about Bitcoin and cryptocurrency markets in the past couple of years. He also sounds convinced with the cryptocurrency growth after he praised and supported Bitcoin on the recently launched social media app Clubhouse last month.
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