In Wall Street Warriors, students write about important aspects of the finance field as well as news in the stock market. This week, sophomore Owen Ebner discusses Tesla investing in Bitcoin and the impact it has made on Bitcoin stock and the impact it can make on the perception of cryptocurrency.
On Monday morning, Tesla (TSLA) announced that it would be buying 1.5 billion dollars worth of Bitcoin. With that, they also announced that they will begin accepting the cryptocurrency as payment. Tesla may be the first automobile company to do this, but they join a growing list of major companies outside of this field that have invested in Bitcoin.
Tesla is the biggest electric vehicle company, with a market capitalization (how much a company is worth, determined by multiplying the amount of shares and the price of each one) of over 800 billion dollars. Lately they have been very successful, and the stock has risen around 450% in the past year. With 19 billion dollars in cash sitting around, they did what most companies would do: invested it.
In the past, Tesla CEO Elon Musk has shown interest in Bitcoin and with this purchase he used almost 10% of the company's available cash.
Two weeks ago, Musk added the hashtag #bitcoin to his Twitter bio and in a later interview on the Clubhouse audio chat app he said, “I do at this point think Bitcoin is a good thing, and I am a supporter of Bitcoin.”
Bitcoin is similar to Tesla in that it is growing at an incredible rate. It is a cryptocurrency, which means you can exchange it without the transaction being tracked. It is up 350% the past year, and is the most valuable and talked-about cryptocurrency. Each Bitcoin costs 44,500 dollars at the time of writing, and many people consider it to be the wave of the future.
Tesla's announcement of the investment sent Bitcoin soaring around 20%, an all-time high. The purchase is a huge endorsement of Bitcoin and will help continue to make cryptocurrency more mainstream. It would not be a surprise to see more major companies follow Tesla's lead.
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