Tesla announced in an SEC filing Monday that it has bought $1.5 billion worth of bitcoin, saying it would start accepting bitcoin as payment after CEO Elon Musk was credited with helping raise the price of cryptocurrencies via Twitter messages.
The electric car maker said it bought the bitcoin for “more flexibility to further diversify and maximize returns on our cash,” according to a filing with the Securities and Exchange Commission. If Tesla starts allowing cay buyers to pay in bitcoin, it will be the first major automaker to do so. The $1.5 billion bitcoin purchase will give Tesla liquidity in the cryptocurrency once it starts accepting it for payments, CNBC reported.
In the past 24 hours, bitcoin rose more than 10 percent to an alltime high price of $44,801.87. Tesla warned investors in Monday’s SEC filing that bitcoin’s price was volatile. Tesla shares were up more than 2.5 percent in premarket trading.
“In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity,” Tesla said in the SEC filing. “Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term.”
Accepting bitcoin as a form of payment will be done “initially on a limited basis, which we may or may not liquidate upon receipt,” the filing said.
Signs of Musk’s growing interest in bitcoin were evident in his Twitter exchanges in December, The Block reported.
In December, Musk inquired about converting “large transactions” of Tesla’s balance sheet into bitcoin in a Twitter exchange with Microstrategy CEO Michael Saylor. Saylor encouraged Musk to move cash from Tesla to bitcoin and “do your shareholders a $100 billion favor.” Musk wrote in a separate tweet, “Bitcoin is my safe word.”
On Feb. 1, Musk added #bitcoin to his Twitter bio, a move that sent prices of it higher. That mention has since been removed. Too late. “He’s already telegraphed it to the market,” said Meltem Demirors, chief strategy officer at London-based asset management firm CoinShares. “One of the world’s largest corporations doing this—I think it opens the floodgates.”
In a Feb. 1 chat on social media app Clubhouse, Musk said he thought bitcoin was “on the verge” of getting broad acceptance in the conventional finance industry, Reuters reported. “I gotta watch what I say here ’cause some of these things can really move the market,” he said during that chat.
A board committee approved changes to Tesla’s company policy on investments that will allow it to invest cash in gold bullion and gold exchange-traded funds among other assets, Wall Street Journal reported.
The $1.5 billion purchase of bitcoin is a significant chunk of Tesla’s cash holdings, which totaled $19.4 billion at the end of 2020, compared with $6.3 billion at the end of 2019.
Gold bug, investor and stakeholder Peter Schiff has long insisted that bitcoin is fool’s gold and anybody buying it is a fool. Schiff tweeted on Monday about Tesla, GameStop, and the phenomenon of loading up on bitcoin.
“Now that the air is coming out of the #GameStop bubble, it’s time for the company to change its name to BitStop. Then it can sell its over-priced shares into the market and use the proceeds to load up on #Bitcoin. Then BitStop shares can moon along with #Tesla and #MicroStrategy” Schiff tweeted.
A Twitter respondent replied to Schiff, “The air is finally coming out of the gold bubble and into harder more sound money which is Bitcoin.”
MicroStrategy CEO Saylor thanked Musk for his leadership, tweeting on Monday, “Congratulations & thank you to @elonmusk & @Tesla on adding #Bitcoin to their balance sheet. The entire world will benefit from this leadership.”
Some Twitter users gave credit to MicroStrategy CEO Saylor. “You did it sir. Thank you” one said. “This time is Real. Is not an endorsement,” another tweeted. “I think this is the definitive approval of bitcoin from companies as store of value. Other companies to follow now. Congratulations to all!” And this: “THANKYOU MICHAEL WE CANNOT THANK YOU ENOUGH – FROM THE WHOLE ENTIRE CRYPTO COMMUNITY THANKYOU”.
“There are no coincidences,” another Twitter user said, noting that Tesla’s bitcoin announcement happened at the same time as “$BTC passed $TSLA in market cap.”
It was considered a huge boost for bitcoin in 2020, when PayPal said it
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would allow users to buy and sell bitcoin in their digital wallets. Twitter CEO Jack Dorsey’s Square app also lets users buy bitcoin through its Cash App. Square bought $50 million worth of bitcoin in October. In late January, bitcoin self-mining company Marathon Patent Group Inc. said it bought $150 million worth of bitcoin.
“Bitcoin sentiment has already shifted so dramatically over the last year but over the last three months that’s only accelerated. From here it only accelerates,” Demirors predicted.
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