Tesla

Musk Bets Big on Bitcoin

Musk Bets Big on Bitcoin

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The success of Bitcoin as a viable form of currency has been the subject of debate for several years now and it appears that those who believe in the power of crypto may well be vindicated after all. 

The strategy to open up vehicle purchase for crypto owners, plays well to Tesla’s digital modus operandi.

On Monday 8 February, electric carmaker Tesla announced that it had invested $1.50bn in Bitcoin, with further plans to accept the currency as a form of payment, in line with laws and regulations around the use and exchange of cryptocurrency, further down the line. This is not surprising given CEO Elon Musk’s outspoken support of Bitcoin. The investment by Tesla caused the price of Bitcoin to jump to over $46,000 at the time of writing. Although there are numerous drawbacks regarding the use of cryptocurrency, such as lack of regulation, volatility and a susceptibility to attacks, which has been identified by the carmaker in its 10-K filing (a financial statement to the US regulator) to the Securities and Exchange Commission (SEC), it remains to be seen how the market and law making bodies will respond to this move. Musk’s strategy of placing a stake in Bitcoin and causing it to rally further, by linking his company’s name and success to crypto, could be a great strategy that will enable Tesla to reach a wider segment of consumers. It may also lead to regulators and other crypto supporters to push for greater attention towards Bitcoin and to find solutions that can allow this currency to become more widely accepted and regulated. 

Source: SEC 

Although there are a number of car dealers around the world that have been accepting payment in Bitcoin, no car company has made this move in its own right as part of a company wide strategy. As of now, Tesla is the only carmaker that has publicly backed Bitcoin to such a large extent, with its investment and acceptance of Bitcoin payments as part of its plans. This self-segmentation move allows those with an affinity for technology and cryptocurrency to deploy their digital currency into yet another asset class (vehicles) and allows for greater liquidity as it provides an important avenue to transact with a commodity purchase that is available globally with vehicles. 

Asset classes such as real estate and art have been showcased as examples where cryptocurrency like Bitcoin has been accepted in exchange for title of ownership through smart contracts for some time now. The strategy to open up vehicle purchase for crypto owners, plays well to Tesla’s digital modus operandi and will likely see Tesla outlets using smart contracts to transact with those purchasing their vehicles and other products through Bitcoin.

We foresee greater crypto skills for company treasury departments and for those wearing finance hats on company boards. Crypto may be a must-have skill set for Enterprise CFOs of the future, given the volatility of the asset it remains to be seen how the market responds to this further and begins to push products that allow treasury to hedge against this volatility. 
Tesla has long been a leader both within the automotive industry and beyond and where Tesla goes others follow suit. We will undoubtedly see more companies following in Tesla’s footsteps, by integrating Bitcoin payments into their business models. It seems like Bitcoin Bulls have something to celebrate and rally the digital currency to new heights once again. It is worth noting that amongst some of the bigger backers of Bitcoin include, Billionaire Chamath Palihapitiya who had also backed Tesla, back when the market was bearish, made a killing on the public markets thanks to his contrarian bet. Chamath backed Tesla, Tesla backed Bitcoin, that likely drives up Chamath’s fortunes even more given how long he is on the cryptocurrency and the virtuous cycle continues. 

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