Tesla has invested $1.5 billion in bitcoin and plans to start accepting the cryptocurrency as payment “in the near future,” the electric automaker said Monday in a Securities and Exchange Commission filing.
The move is a major sign of support for bitcoin and could encourage other major companies to follow suit in accepting the world’s most popular cryptocurrency. Bitcoin jumped after the Tesla announcement, hitting a new high before retreating to $43,176. It is up more than 46 percent since the start of the year, according to Coindesk.
Dan Ives, managing director of equity research at Wedbush Securities, called Tesla’s embrace of bitcoin a potentially “game-changing move.”
“This morning’s news formalizes the strategy of Musk and Tesla diving into the deep end of the pool of bitcoin and crypto,” Ives said in e-mailed comments to the Post. “Ultimately, investors and other industry watchers will be watching this closely to see if other corporations follow the lead of Tesla on this crypto path.”
An HSB survey published in 2020 found that 36 percent of small and midsized American businesses accept cryptocurrency. Tesla will join big names such as Microsoft, Wikipedia, and PayPal in accepting bitcoin worldwide.
Several digital currency exchanges, including Coinbase and Gemini, reported technical difficulties amid heavy trading after Tesla’s SEC filling news broke.
Tesla’s chief executive, Elon Musk, has been vocal in his enthusiasm for cryptocurrency in recent days. In an early February interview on Clubhouse, the popular audio chat app, Musk called himself a bitcoin supporter and said he’d been “late to the party.” He also briefly added #bitcoin to his Twitter bio.
“Bitcoin is really on the verge of getting broad acceptance by conventional finance people,” Musk said in the interview.
His tweets also are being credited with driving up the price of Dogecoin, a low-valued, meme-based cryptocurrency that started as a joke between two engineers, in the past week. On Sunday night, after Musk tweeted, ’'Who let the Doge out,’' it surpassed 8 cents for the first time. It now has a market capitalization of more than $10 billion and is up 1,266 percent year-to-date, according to Coindesk.
Musk’s seemingly random support for the meme coin could raise questions now that Tesla plans to integrate cryptocurrency into its business strategy. The SEC has tangled with Musk over his Twitter use in the past, including a 2018 lawsuit following tweets in which he said he had “funding secured” to take Tesla private at $420 per share. (Musk later said this was a joke, and that the $20 million penalty was “worth it.”)
David Trainer, chief executive of investment research firm New Constructs, said he thinks Musk’s focus on cryptocurrency is a “distraction,” meant to stir up more interest in the company’s stock.
“Tesla is terribly overvalued and risky,” Trainer said in comments e-mailed to the Post. ”Bitcoin is yet another gimmick to lure more unsuspecting investors into gambling on Tesla’s stock.”
In its last earnings report, Tesla performed well below analyst expectations for earnings per share but delivered higher than expected revenue: nearly $10.75 billion in the final quarter of 2020. The company stands to benefit from the Biden administration’s electric vehicle ambitions, including the president’s plan for an all-electric fleet of government vehicles.
But Tesla also is about to face fiercer competition. In late January, General Motors pledged to stop making gasoline-powered passenger cars, vans, and sport utility vehicles by 2035. The Big Three automaker has said it will invest $27 billion in electric vehicles and associated products from 2020 to 2025. As part of its plan, GM — maker of Buicks, Cadillacs, Chevrolets, and Corvettes, among others — will manufacture about 30 types of electric vehicles.
In the SEC filing, Tesla said it was branching into bitcoin and other alternative assets to maximize returns. But it also warned that such currencies are mired in uncertainty and could continue to be “highly volatile.”
“The prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers, and businesses is unpredictable,” Tesla said in the filing. “Their lack of a physical form, their reliance on technology for their creation, existence, and transactional validation, and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.”
Bitcoin has been wildly popular during the pandemic, as economic uncertainty and market volatility brought on by the coronavirus pandemic pushed more people to consider alternative currencies. The digital coin, which was initially priced less than a cent when it was created more than a decade ago, now has a market capitalization of more than $802 billion, according to Coindesk.
But the rush of recent popularity still won’t eclipse the risk for most companies, Craig Erlam, senior market analyst with OANDA, said Monday in comments e-mailed to the Post.
“Some other companies may be tempted to follow but the vast majority will be far too cautious to expose themselves to the volatile world of cryptos,” Erlam said. “Musk isn’t one to shy away from bold moves though and has now put his money (well, Tesla’s) where his mouth is.”