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Has Tesla’s $1.5B bitcoin investment made crypto mainstream?

February 17, 2021

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Has Tesla’s $1.5B bitcoin investment made crypto mainstream?

Bitcoin prices have hit an all-time high after Elon Musk’s Tesla bought $1.5 billion worth of the cryptocurrency last week. Following the announcement, bitcoin immediately surged 13% and has continued to grow in value.

Bitcoin prices have hit an all-time high after Elon Musk’s Tesla bought $1.5 billion worth of the cryptocurrency last week. Following the announcement, bitcoin immediately surged 13% and has continued to grow in value.

Now that the wealthiest person in the world’s company has invested heavily in bitcoin, some analysts believe cryptocurrency has achieved a new level of legitimacy.

“[Elon Musk] has the power to influence markets, and this man is the key to crypto going mainstream,” Eleesa Dadiani, a London-based entrepreneur and crypto broker told Bloomberg.

Musk has been a vocal supporter of cryptocurrency on Twitter and the invite-only chat app Clubhouse.

The foundations for cryptocurrency’s wider acceptance have already been laid. Since October, bitcoin prices have soared over 300%. This is likely due to institutional investors warming to the idea of cryptocurrency, as well as PayPal, Visa and MasterCard all starting to accept it.

This is a far cry from when cryptocurrency was deemed a valueless currency used only to purchase contraband on the dark web.

“Tesla’s purchase of $1.5 billion of bitcoin not only continues the momentum of public companies purchasing crypto, but could be a watershed moment that establishes some allocation of digital assets as a cornerstone of a healthy, diversified treasury,” John Wu, president of blockchain technology company Ava Labs, told Forbes.

According to Tesla’s filing, the company bought bitcoin for “more flexibility to further diversify and maximize returns on our cash.”

However, Tesla has highlighted the risks of this kind of investment.

“The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties,” the company said. 

“For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable.”

The question remains whether mainstream investors will have the same appetite for cryptocurrency’s volatile nature. Although it can quickly rise in value, it can plummet just as fast. On January 21, bitcoin lost 10% of its value in a day.,

It’s interesting to note how much influence the investment choices of a public figure such as Musk can have on an asset.

 

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In the upcoming session, we will be joined by Greg Tolpigin, Head of Proprietary Trading at Gleneagle Securities. If you would like to attend the session and have an opportunity to ask Greg questions live, you can book here.

 

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