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business
Monday Feb 08 2021
By
Reuters

Tesla sends bitcoin soaring with $1.5bn investment

By
Reuters
The Tesla logo is seen on a car in Los Angeles, California, U.S., July 9, 2020. — Reuters/File

  • Bitcoin surged more than 10% on Monday to a record high of $43,625
  • Analysts say the move was liable to prove a game changer 
  • Musk has also endorsed other crypto currencies in the recent past


Tesla said on Monday it had invested around $1.5 billion in bitcoin and expected to begin accepting payment for its cars and other products with it in the near future, prompting a more than a 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.

A well-known supporter of bitcoin, Chief Executive Officer Elon Musk has been weighing in regularly over the past week to a frenzy in retail investment, also driving up shares in meme-based digital currency dogecoin and shares of U.S. video game chain GameStop.

Read more: Elon Musk says he's taking a break from Twitter 'for a while'

Musk said a week ago that bitcoin was “on the verge” of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency.

“I think we will see an acceleration of companies looking to allocate to Bitcoin now that Tesla has made the first move,” said Eric Turner, vice president of market intelligence at cryptocurrency research and data firm Messari.

“One of the largest companies in the world now owns Bitcoin and by extension, every investor that owns Tesla (or even just an S&P 500 fund) has exposure to it as well.”

Bitcoin, which has set new record highs in recent months after a rollercoaster ride over the past decade, has also drawn support from major financial institutions this year. The world’s biggest money manager Blackrock recently changed a handful of investment mandates to allow some of its funds to invest in the currency.

Read more: Elon Musk back on Twitter two days after he said he would be away 'for a while'

Central banks remain sceptical of digital currencies, but analysts say the more real world uses appear for bitcoin, the more attractive it will prove as a long term store of value.

Tesla said in a filing the decision was part of its broad investment policy as a company and was aimed at diversifying and maximizing its returns on cash.

It said it had invested an aggregate $1.5 billion in bitcoin under the changed policy and could "acquire and hold digital assets from time to time or long-term". 

“He’s now putting his money (shareholders’) where his mouth is,” Markets.com analyst Neil Wilson said.

Read more: Elon Musk overtakes Amazon's Jeff Bezos to become world's wealthiest person

“But given his recent comments – and adding #Bitcoin to his Twitter bio on January 29th – it also raises a real question about possible market manipulation.”

Bitcoin surged more than 10% on Monday to a record high of $43,625 after Tesla’s disclosure.

Musk has also endorsed other crypto currencies in the recent past. He gave dogecoin, the coin based on a popular internet meme, a shoutout on Twitter last week sending its price to record highs over the weekend.

Late on Sunday, in a fresh endorsement for the cypto currency, Musk tweeted “Who let the Doge Out” -- mimicking lines from the famous song by Baha Men from the year 2000.

The coin has also received attention from California rapper Snoop Dogg by putting up an image of a dog tagged “Snoop Doge” on his Twitter timeline.

Dogecoin was created largely as a satirical critique of the 2013 crypto frenzy and is not taken as seriously as bitcoin or ethereum. It almost doubled since Friday hitting a record $0.0871, according to data on blockchain and cryptocurrency website Coindesk.