The crypto world has been experiencing quite a bit of shake ups recently with the latest headlines being that the electric car giant, Tesla, invested a whopping 1,5 billion dollars in “digital gold” – Bitcoin. On Monday, Tesla Inc unveiled their intention to invest in the coin days after chief executive Elon Musk drove the currency’s price up, simply by adding a “#bitcoin” hashtag in his Twitter bio. Even though the tag was removed a couple of days later, Musk kept hyping BTC and other cryptocurrencies, namely Dogecoin (DOGE), to his 46 million audience on Twitter.
There were speculations back in December, where Musk mooted the possibility of a larger transaction of Tesla’s balance sheet into Bitcoin. In the year behind us, Bitcoin was up by almost 300% and is already up by 50% this year. “The Musk intervention” most definitely helped the surging prices, which can be noticed on the rest of the market as well. Smaller currencies, Ethereum and XRP, which tend to follow Bitcoin’s moves simultaneously, also experienced a rising movement, as much as 5% and 4% respectively. Tesla’s move prompted a 7% jump in the BTC price, but why did Tesla do it?
After filing with the US Security and Exchange Commission (SEC) their plans to start accepting the digital coins as an additional payment option for the company’s products, Tesla propelled the $44,000-mark breach of Bitcoin’s value for the first time ever. The company updated its investment policy in order to make it more flexible, with the idea to diversify and maximize returns on idle cash. Implementing this new payment system will be accomplished in the near future, according to laws and initially on a limited basis. The company will reserve the rights to liquidate or hold on to these digital assets upon receipt. But what does it mean?
Crypto traders and investors are recognizing this move as a huge step toward a more widespread institutional adoption of Bitcoin and digital currency in general. If it keeps happening it could mean that “the future of money” is closer than we think. It can also be interpreted as a solid asset-reserving tool by other companies, because a move as such, from a company like this can serve as testimony to stability of cryptocurrencies. Tesla is the biggest consumer-facing company that invested in a digital asset, but it’s important to note that it does not hold the largest number of Bitcoin for a sole entity’s corporate revenue.
The huge impact that the CEO of Tesla, Elon Musk has on his followers and on social media in general has prompted many to buy digital currencies after the series of crypto-encouraging tweets. Experts believe though, that this huge volatility in the price of Bitcoin without major fundamental reasons could be a potential red flag to be cautious about. The uncertainty is the only thing certain about crypto right now. Various risks are implied given that this is a relatively new trend, so the road to long-term adoption might be incalculable. The reliance on technology for creation, validation and transactions in general might be the biggest issue currently, along with the corresponding security laws that need to cover the activity of digital currencies in order to prevent any malicious attacks and misuse. These laws are unclear at the moment and might change in the future, as we move along with the crypto trend. Other major companies have also followed the trend of investing in digital coins such as MicroStrategy (which holds a hefty amount of 71,079 Bitcoin), Square, Microsoft, AT&T, Pizza Hut, Subway, etc. We can only hope that the continuous adoption of cryptocurrency among companies as a payment and asset holding system will continue and that the further implementation will go without any major financial condition damage. Tesla has possibly paved the way to additional investing in Bitcoin and other digital coins, reinforcing the trend and the up-and-coming financial era.