CRYPTO MOVERS AND PRICES
Crypto is higher on the news that Tesla bought USD 1.5 billion of bitcoin (BTC) for its treasury in January. CME Ethereum (ETH) futures launched overnight but have yet to see any volume.
Crypto Story of the Day
Tesla has announced that it’s purchased USD 1.5 billion-worth of BTC. The purchase was made to offer “more flexibility to further diversify and maximize returns on [their] cash.” Tesla will also begin accepting BTC as a form of payment for its products in the “near future,” according to an SEC Filing. The news has sent BTC to new record highs.
According to an annual report filed with the SEC and made public this morning, Tesla updated its investment policy in January 2021 “to provide [them] with more flexibility to further diversify and maximize returns on [their] cash that is not required to maintain adequate operating liquidity.” After this change to its investment policy, Tesla invested an aggregate USD 1.5 billion in BTC.
According to publicly available data, Tesla had USD 14.53 billion in cash reserves. This makes Tesla’s purchase of BTC approximately 10% of its total cash holdings.
The document also reveals that Tesla plans to begin accepting BTC in the near future as payment for its products, which it “may or may not liquidate upon receipt.” In discussing bookkeeping practicalities related to the investment, the filing notes that Tesla “currently [intends] to hold these assets long-term… these charges may negatively impact [their] profitability in the periods in which such impairments occur even if the overall market values of these assets increase.”
In a section of the filing that discusses the broad risks the business faces, the firm’s holding and acquisition of “digital assets that may be subject to volatile market prices, impairment and unique risks of loss” is cited. The section explains that digital assets have experienced volatility in the past and may continue to do so, and their “long-term adoption by investors, consumers and businesses is unpredictable.”
Tesla CEO Elon Musk endorsed BTC on the social media app Clubhouse at the beginning of the month, describing the asset as “really on the verge of getting broad acceptance by sort of the conventional finance people.” At the end of January, Elon added the word “bitcoin” to his twitter bio— which he subsequently removed— and around the same time tweeted “[i]n retrospect, it was inevitable.”
Some crypto media outlets speculated the tweet was in reference to BTC. Musk has also been making crypto headlines over his tweets regarding Dogecoin (DOGE) that have seen that coin add roughly 8 billion to its market cap since the end of January.
After years of mentioning BTC and cryptocurrency and practically teasing the industry, Musk has finally made his first corporate foray into the space. In spite of him appearing to become more positive on crypto throughout the Robinhood/Reddit debacle, the purchases look likely to have been made before those events.
BTC does feel like a good fit for Musk, who launched his first major enterprise during the dot com run-up and envisions multi-planetary living where there will be plenty of opportunity for the development of new financial systems. What TSLA's purchase means for the space will ultimately be shown with time.
While surely a variety of startup CEOs will follow in Musk's footsteps, his maverick reputation leaves a bit of a question mark in terms of whether other high-profile business leaders will follow in the near-term. Nonetheless, there is arguably no other company that has been more closely associated with millennials and the next generation of investors than Tesla, and that firm is now inextricably linked with crypto.