Elon Musk’s Tesla reveals US$1.5 billion Bitcoin holding
The electric car-maker's SEC filing shows it has bought up to US$1.5 billion of the leading cryptocurrency in January, and may be investing in more.
The price of Bitcoin has surged to record highs today after news that Tesla, the electric automaker founded by Elon Musk, disclosed holdings of up to US$1.5 billion in the popular digital currency. Bitcoin rocketed over 13% to an all-time high of more than US$44,000 on Monday, as Tesla also announced plans to begin accepting Bitcoin payments, as well as future cryptocurrency investments.
Was this expected?
In late January, Musk changed his Twitter bio to "#bitcoin", and recently speculated that digital currencies such as bitcoin would likely be "the future currency of Earth." He has also spent weeks tweeting about the meme cryptocurrency Dogecoin, which has enjoyed a huge price surge as a result.
However, this is still something of a surprise, and Tesla is far-and-away the biggest company to announce it has acquired cryptocurrency.
What does this mean for Tesla shareholders?
While Tesla shares were trading slightly higher on the news, the long-term implication for the company and its investors remains to be seen. Fans of cryptocurrency will likely appreciate the company's attempts to diversify, while more conservative investors may see it as an overly-risky venture.
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It means Tesla stock will potentially be exposed to the price of Bitcoin, which has traditionally experienced significant volatility. However, the bitcoin purchase represented only 7.7% of Tesla's year-end cash, and around 0.18% of its market cap, which makes it a relative drop in the ocean.
But it does raise question marks over whether Musk's recent social media activity could be considered market manipulation, and also exposes Tesla to potential security breaches or cyberattacks targeting the company's Bitcoin holdings.
Tesla said the investment would "provide us with more flexibility to further diversify and maximise returns on our cash that is not required to maintain adequate operating liquidity."
What does this mean for Bitcoin?
The price of Bitcoin has already enjoyed huge growth over the last few months, but this news could push prices even further as retail and institutional investors flock in. While funds such as MicroStrategy and Grayscale have announced huge cryptocurrency investments, this is the first time a major company has followed suit, which may help legitimise Bitcoin in the eyes of many, and reinforce its viability as a serious investment.
Disclosure: The author owns a range of cryptocurrencies at the time of writing