Elon Musk has helped to drive the popularity of cryptocurrencies, including bitcoin and dogecoin.
Tesla, the electric car company run by the world’s richest person, Elon Musk, revealed on Monday that it had bought $1.5bn (£1.1bn) in bitcoin and said it might soon accept payment in the popular but controversial cryptocurrency.
News of Tesla’s investment in bitcoin sent the digital currency soaring 14% to a record high of $43,500, a 300% increase on this time last year as cryptocurrency investment has moved into the mainstream as global interest rates remain at record lows.
Tesla disclosed the bitcoin holding in a Monday filing with the US Securities and Exchange Commission. The company said it had “updated our investment policy to provide us with more flexibility to diversify further and maximize returns” to allow it to invest cash reserve in “alternative reserve assets including digital assets”.
It said that since the decision was approved by its audit committee, it had “invested an aggregate $1.5bn in bitcoin under this policy and may acquire and hold digital assets from time to time or long term”.
Bitcoin value has hit an all-time high
Value of one bitcoin in dollars
The company added: “Moreover, we expect to begin accepting bitcoin as a form of payment for our products shortly, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.”
According to the SEC filing, the $1.5bn held in bitcoin represents about 8% of all the $19.4bn that Tesla holds in cash and liquid assets.
Musk has helped to drive the popularity of cryptocurrencies, including bitcoin and dogecoin, by regularly tweeting that he is a “supporter” of the cryptocurrencies. He has also joked that bitcoin is his “safeword.”
Earlier this month, the price of bitcoin soared after Musk said he was a cryptocurrency supporter in an interview on Clubhouse, a new social media app designed for wealthy people. “I think, at this point, bitcoin is a good thing,” he said. “And, so, I am a supporter of bitcoin. As I said, I was late to the party, but I am a bitcoin supporter. And I think bitcoin is on the verge of getting broad acceptance by conventional finance people.”
He has previously changed his Twitter biography to “#bitcoin.”
The price of dogecoin also rose after Musk tweeted about it. Dogecoin’s price increased by 50% on 4 February, shortly after he tweeted: “Dogecoin is the people’s crypto.” Dogecoin, which uses a Shiba Inu dog meme as its logo, was started in 2013 as a joke after the invention of bitcoin prompted a wave of imitator cryptocurrencies.
Dan Ives, an analyst at Wedbush Securities, said Tesla’s embrace of cryptocurrency was a “potential game-changing move for the use of bitcoin from a transactional perspective.”
He said: “Investors and other industry watchers will be watching this closely to see if other corporations follow the lead of Tesla on this crypto path or, on the other hand, does it remain a contained few names that make this strategic jump around bitcoin.”
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Simon Peters, a crypto asset analyst at the investment platform eToro, thinks bitcoin could hit $50,000 by the end of the week. “If there were any doubters as to the mainstream acceptance of bitcoin, this surely must mark the end of any skepticism,” he said. “Multiple other brands already accept bitcoin as payment, and we would imagine that, in time, other major companies will follow Tesla’s example.”
Eric Turner, the vice president of market intelligence at cryptocurrency research firm Messari, said: “I think we will see an acceleration of companies looking to allocate to bitcoin now that Tesla has made the first move. One of the largest companies in the world now owns bitcoin and, by extension, every investor that owns Tesla, or even just an S&P 500 fund, has exposure to it as well.”
However, others have told people to be careful before investing their savings in bitcoin.
The Tesla investment came as the governor of the Bank of England, Andrew Bailey, reiterated his skepticism about the digital currency. On Monday, he told a committee of MPs that bitcoin has “no intrinsic value at all”. He said: “I’ve said several times, ‘Only buy bitcoin if you’re prepared to lose all your money.’ It doesn’t mean you will lose all your money, and it doesn’t mean the value will go to nothing, but it has no intrinsic value … People may want it, and they may want to collect it, but it doesn’t have any intrinsic value at all.”
Meanwhile, Musk announced Monday that he had pledged $100m to a fund to develop technology that removes carbon dioxide from the atmosphere or oceans. Environmentalists have criticized Bitcoin because it generates CO2 through the sheer amount of computing power it uses.
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