Bitcoin Soars Again After Tesla Bought $1.5 Billion Worth Of The Cryptocurrency

08/02/2021

The world's richest man and Tesla founder, CEO Elon Musk has for numerous times played with the cryptocurrency market by mentioning them once in a while in his tweets.

In another moment, in a series of tweets with CEO of Microstrategy, Musk has also asked whether giving his shareholders a "$100 billion" favor is possible.

And just after sending the price of the cryptocurrency to records high, Tesla announced that it has bought $1.5 billion worth of Bitcoin.

Tesla's move into the cryptocurrency market represents a huge investment of a significant percentage.

In a filing with the Securities and Exchange Commission (SEC), the company said that it is investing with that huge amount of cash for "more flexibility to further diversify and maximize returns on our cash."

The company had around $19 billion in cash and cash equivalents at the end of 2020, according to its most recent filing.

Elon Musk when visiting Tesla's Gigafactory in Berlin, Germany.
Elon Musk when visiting Tesla's Gigafactory in Berlin, Germany, in September 2020. (Credit: Getty Images)

As a result of this, Bitcoin prices again surged to new highs, reaching a price of over $45,000 per coin. Tesla shares were up up by more than 2% in Monday morning.

Following the investment, Tesla also said that it is planning to start accepting payments in Bitcoin in exchange for its products "subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt."

This would make Tesla the first major automaker to do this.

The $1.5 billion worth of Bitcoin will give Tesla liquidity in the cryptocurrency once the company starts accepting it for payments.

In its SEC filing, Tesla warned investors of the volatility of Bitcoin's price.

While creating a hype in the market to increase share prices is nothing new, this move by Tesla also raises some questions about his behavior.

This is because Musk as its CEO, has been credited for increasing the prices of cryptocurrencies like Bitcoin and Dogecoin by posting positive messages that have encouraged more people to buy the digital currencies.

While Musk has gotten into troubles for his market moving tweets in the past, it is at this time unclear how Musk's strategy with Tesla applies to his tweets about cryptocurrencies.

Prior to Tesla's big debut to the cryptocurrency market, Musk has for months been commenting about Bitcoin, moving its price.

At the end, Tesla's move is marks the biggest endorsement of the controversial cryptocurrency by a mainstream firm.

Despite spending a mere 10% of its cash reserve, $1.5 billion spent to buy Bitcoin is at this time, the biggest single buy of the popular cryptocurrency from a public company ever.