Tesla Buys $1.5B in Bitcoin and Plans to Accept the Cryptocurrency as Payment
Bitcoin, Dogecoin, GameStop... what's next?
Electric automaker Tesla says that it has invested a hefty $1.5 billion in Bitcoin, sending the price of the cryptocurrency into orbit where it reached new all-time highs.
A filing with the United States Securities and Exchange Commission (SEC) reveals that Tesla's board updated the company's investment policy in January 2021. The goal was to enable more flexible diversification of its investments outside of just cash—this includes both gold and "digital assets," or cryptocurrency. The manufacturer then announced its bulk acquisition of Bitcoin as plans to use it not only as an investment, but also to take it as a payment for products, which may include its vehicles and other services.
"[W]e invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or longterm," reads a 10-K filing that Tesla issued with the SEC on Monday. "Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt."
The news sent the price of Bitcoin skyrocketing. At the time of writing, it had reached its second all-time high for the day—$44,751—and continues to fluctuate. Based on the lowest possible price of the cryptocurrency in January, it's possible that the automaker may have purchased as many as 49,125 Bitcoin, though a more realistic picture would be a gradual purchase yielding fewer assets held.
This is the second time in recent history where something connected to Tesla has inflated the price of Bitcoin. On Jan. 29, CEO Elon Musk changed his Twitter bio to read "#bitcoin," which was largely credited for increasing the cryptocurrency's value by nearly 16 percent in a single day. He removed the callout on Feb. 4 before adding support for the Reddit-inspired rally of meme-tier crypto, Dogecoin, which has seen a dramatic increase from $0.007 to $0.08 in just 11 days.
Musk has had a long history of battling the SEC over stunts like this where the CEO's memes and mentions are in tandem with public-sparked market fluctuation. It's not clear how (or even if) the SEC will respond to Musk's influence over the cryptocurrency like it has on Tesla's own stock.
On a non-financial front, one might question what effect this move will have on the efficiency of the Bitcoin network as a whole. Transactions on the bitcoin blockchain are "mined" by power-hungry hardware. According to a recent report by CNBC, this results in an annual energy consumption higher than that of the Netherlands and a carbon dioxide footprint of nearly 37 megatons, or roughly the equivalent output of New Zealand as a whole. Given Tesla's environmentally friendly mission, this move will almost undoubtedly raise a query by supporters into Bitcoin's operating requirements.
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