The cryptocurrency and electric vehicle (EV) worlds collided Monday when Tesla revealed that it has purchased $1.5 billion in bitcoin and will soon accept it as payment for products. The move would make it the first major automaker to do so.
The Elon Musk-led company stated in its most recent annual report that it made the decision to invest in bitcoin to provide the company “more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.”
Tesla added, “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 announcement is significant as most companies do not accept bitcoin as a direct payment.
The news sent bitcoin’s price soaring to more than $44,000 Monday according to CNBC. The cryptocurrency’s price averaged around $34,730 in January. Shares of Palo Alto-based Tesla surged above 2 percent Monday morning.
The industry giant’s investment in bitcoin represents a large chunk of its cash on hand. According to Tesla’s latest filing, the company ended 2020 with over $19 billion in cash – a huge increase over the near $6.3 billion it reported at the end of 2019.
The news may not come as a surprise to those who follow 49-year-old Musk on Twitter. In recent weeks, the billionaire has used the platform to encourage people to buy digital currencies like bitcoin and dogecoin – a cryptocurrency that got its name from a popular meme and was started as a joke in 2013 to pay homage to bitcoin. Other celebrities have recently tweeted about dogecoins, too. This had led dogecoin – created without any real purpose – to reach record high prices. The cryptocurrency had a market value of almost $10.5 billion Monday, according to CoinMarketCap.com.
Musk added the hashtag #bitcoin to his Twitter bio two weeks ago – a move that sent bitcoin’s value soaring 20 percent. Days later he expressed his support for the cryptocurrency on social media platform Clubhouse. Musk said, “I do at this point think bitcoin is a good thing.” “I am a supporter of bitcoin. I am late to the party but a supporter. I think bitcoin is on the verge of getting broad acceptance by conventional finance people,” he added.