Markets and investors react to Tesla’s $1.5bn BTC investment

An SEC filing yesterday revealed that the electric car company had allocated 7.7% of its gross cash to Bitcoin

An SEC filing yesterday revealed that Tesla has invested $1.5 billion in Bitcoin in an attempt to maximise returns on cash that isn’t being used in the daily running of the electric car company. The Form 10k filing for the fiscal year ended 31 December 2020 showed that Tesla’s Bitcoin allocation represents 7.7% of its gross cash position.

The filing also added: “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.”

Following the news, the price of Bitcoin surged by around 20% to set a new all time high above $48,000. At the end of January, Tesla CEO Elon Musk changed his Twitter bio to #bitcoin, which also preceded a spike in the price of Bitcoin. Dogecoin likewise experienced a rally after Musk’s endorsement.

The traffic volume spike caused by the Bitcoin pump led to problems at a number of exchanges. Many Twitter users complained that Kraken had gone down, while Binance CEO Changpeng Zhao tweeted: “Massive incoming traffic. Some lags observed in some regions. Auto scaling. Should catch up soon. All because of Elon.”

Many early Bitcoin adopters will be reaping the benefits of the ‘Musk effect’.MicroStrategy’s Bitcoin holdings are now worth more than $3.1 billion and Gemini founders the Winklevoss twins’ 2013 Bitcoin investment of $11 million, as quoted in the New York Times, today amounts to over $3.3 billion.

As one of the largest companies in the world, Tesla could inspire an acceleration of other companies looking to invest in Bitcoin, as well as hastening retail adoption in the shorter term. Indeed, some have already suggested that Apple would do well to follow suit.

Cameron Winklevoss tweeted yesterday in response to the news: “If you are a company CEO and thinking about adding #Bitcoin to your balance sheet you still have the opportunity to be an early adopter. But not for long.”