The announcement that much of the crypto world has been hoping for is here: Tesla has invested in bitcoin.
The announcement caps a history going back to at least 2018 of Tesla founder and CEO Elon Musk tweeting and commenting on bitcoin and other cryptocurrencies including dogecoin.
A growing number of big institutional investors including Paul Tudor Jones II and Bill Miller have pushed into bitcoin as a potential hedge against inflation, as the Federal Reserve and central banks around the world pump trillions of dollars of freshly created money into financial markets to stimulate their coronavirus-racked economies. Tesla joins publicly traded companies including Michael Saylor's MicroStrategy that have steered corporate money into bitcoin.
Bitcoin's price shot up more than 14% after Tesla's disclosure to a new all-time high of $44,801, based on CoinDesk's Bitcoin Price Index. The jump pushed bitcoin's year-to-date return to about 50%, versus 3.9% for the Standard & Poor's Index of large U.S. stocks.
"We think this is just the start to a much wider adoption from household institutional names, finally ready to make the crossover into the crypto space," Joel Kruger, strategist at the cryptocurrency exchange LMAX Digital, said in an email.
The Tesla announcement and subsequent price move in bitcoin apparently triggered such a flurry of trading activity that big cryptocurrency exchanges including Binance, Coinbase, Gemini and Kraken all experienced technical difficulties.
The 12-year-old bitcoin, which is the oldest and largest cryptocurrency, now has a market valuation of $818 billion, just behind Tesla's $823 billion but ahead of Facebook's $757 billion, according to the website companiesmarketcap.com. Only seven other publicly traded companies in the world are larger than bitcoin, though it's still well shy of gold's $11.7 trillion market value and silver's $1.5 trillion.
According to Tesla's annual report, the investment policy was updated in January to provide "more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity."
- The policy includes investment in "alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets."
- Tesla also expects to begin accepting bitcoin as a form of payment for its products "in the near future." This would initially be on a "limited basis, which we may or may not liquidate upon receipt."
“I should have bought [bitcoin] eight years ago," he said in a chat on Feb. 1. "I do at this point think bitcoin is a good thing.”
Brian Brooks, who recently stepped down as U.S. comptroller of the currency, a top banking-industry regulator, said Monday in an interview on on CoinDesk TV that "for people who are invested in bitcoin it's exciting news."
"For people who are looking at the rest of the world it's actually a little bit scary news," Brooks said.
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