Investing in Bitcoin (opens in new tab) is already paying off for US automaker Tesla (opens in new tab) according to analyst at Wedbush Securities Daniel Ives who calculated that the company has already made around $1bn in paper profits from its investment.
Back in January, the company announced that it had purchased $1.5bn worth of Bitcoin (opens in new tab) in an effort to “further diversify and maximize returns” on its cash. Tesla also said that it will begin accepting the cryptocurrency as payment for its electric vehicles on a limited basis in the future.
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In a recently published note shared with CNBC (opens in new tab), Ives explained that Tesla's investment is already paying off and that other public companies may follow suit when it comes to diversifying their holdings, saying:
“Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EV (electric vehicle) cars in all of 2020. While the Bitcoin investment is a side show for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months.”
Throughout last year and in to the beginning of 2021, Bitcoin has seen a huge rally as the price of one coin has risen from $7,347 in January 2020 to a recent high of $57,489 on February 21 of this year. In fact, Bitcoin's market value recently reached $1tn for the first time and so far the cryptocurrency is up 94 percent year-to-date.
While Ives did not explain how he reached his calculations when it came to Tesla's investment in Bitcoin already reaching $1bn, based on data from CoinDesk (opens in new tab), the cryptocurrency went from a high of $34,793 on January 31 to a high of $57,487 on February 20 which was the day he published his note.
Although Tesla CEO Elon Musk has been a vocal proponent of Bitcoin and even Dogecoin (opens in new tab) online, in a recent series of tweets (opens in new tab) he compared cryptocurrencies to fiat currencies, saying:
“Tesla’s action is not directly reflective of my opinion. Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company. To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla. However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere. Bitcoin is almost as bs as fiat money. The key word is “almost”.”
Only time will tell whether or not other large companies decide to follow in Tesla's footsteps but so far its decision to invest in Bitcoin has paid off handsomely.
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Via CNBC (opens in new tab)