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Why Elon Musk Invested in Bitcoin

Why Elon Musk Invested in Bitcoin

Elon Musk, the owner of the U.S. electric vehicle maker Tesla has recently put his bet on Bitcoin by buying $1.5 billion worth of bitcoins. He has further said that Tesla will be accepting bitcoins as a form of payment for its cars in the near future. This has led to lots of buzz in and around the world of Tesla and this cryptocurrency, shooting up bitcoins to make an all-time record of above $48000. However, the question why Elon Musk made such a bet is very likely to come to our minds.

When Bitcoin was first launched in 2008, who would’ve known that they’d worth so much by now! It was like betting or gambling online putting money on Bitcoin. But people who did, they’re the ones laughing now. If you’re into online betting, you can check out Rizk Bonus Code where you will have chance to get amazing promo codes!

Now, we will answer why and what exactly happened that led to Elon Musk investing in Bitcoin. Meanwhile, you can if you’re into online betting. First, let us review what exactly happened.

Liquidizing Cryptocurrency

When Tesla announced its investment on $ 1.5 billion worth of bitcoin, it said to the Securities and Exchange Commissions that this step was taken to bring in more flexibility to further diversify and maximize returns on the cash of Tesla. Such an amount of bitcoin is likely to give Tesla the liquidity in the cryptocurrency once it begins accepting bitcoin payments in exchange for its products.

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Elon Musk has been a public advocate of cryptocurrencies including bitcoin. When in January, the tech big shot added the hashtag #bitcoin to his Twitter bio, the price of bitcoin shot up by almost 20%. This investment has been termed as a ‘diversification strategy’ which is likely to bring important returns to the company. Elon Musk has expressed his regret for not investing in cryptocurrency earlier.

What does this mean for the future of bitcoin and for Tesla? Well, the price is now risen by almost over 50%. This means, Tesla’s investment has already resulted in good amount of profit. While it depends on the exact day of purchase, this is likely to be worth over US $2 billion. This also means lot of other investors and companies will be interested and have been putting their money into their treasury reserves. There is no doubt that following the footsteps of Tesla is very tempting.

However, such a trigger towards the increased investment in Bitcoin is likely to bring its unsettling consequences. Bitcoin is known to be a highly volatile asset which cannot be easily dropped into the category of other cash reserves on the balance sheet of a company worth around a trillion US dollars.

Increasing the Value of Tesla’s Share

Tesla has put almost 8% of its money into the cryptocurrency. This might even lead to creating potential effects on the share prices of the company (Tesla). The share price has already shot up by 2% upon the news of the bitcoin investment breaking out.

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However, this has fallen since then by 5%. If we try to compare this to a more long term example like the Canadian tech company, Microstrategy. The share price of the company increased over tenfold in value in 2020 following its investment into bitcoin. This also went down by almost a quarter in the days since the Tesla’s investment news went live.

Tesla has made it pretty clear that this investment in bitcoins has been approved by the board of the company. Furthermore, the prospect of using bitcoin payments for the products in the future is said to be subjected to applicable laws and proper regulations. Nevertheless, Tesla is likely to be under the inspection of the Financial Crimes Enforcement Network, a branch of the Department of Treasury which regulates exchanges in the cryptocurrency. Any sort of suspicious transactions will be needed to be reported to the authorities or regulators.

Many a times, merchants are unwilling to accept Bitcoins in exchange of their products due to the uncertainty of the value with each transaction. It is literally a gamble between the buyer and the seller about the future value of this digital asset which has no promise of the value when cashed out.

Bottom Line

The impact of Tesla’s announcement might bring a transition or a switch in this existing picture. Bitcoin and its digital peers have the chance to become mainstream currencies in the coming months, which can even be looked as a problem in the practical domain. Only time can tell.

As of today, the bitcoin continues to appear to be the ‘buy’ asset, backed by the Tesla announcement. Only time will tell how many and which of the major companies will follow the same path as this tech leader, and whether Tesla has the conviction to stick to this investment when the next quarterly announcement is made. However, there is no doubt that it will only promote the heavy volatility of the crypto market if the trend continues.

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