Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, DeFi, Blockchain News

Tesla buys $1.5 billion in bitcoin. Are you buying?

by Ilias Louis Hatzis.


HODLing bitcoin is like being in a relationship, with its share of ups and downs. But on this day, like on past Valentine’s days, bitcoin once again showed us some love. The price of bitcoin today reached a new record above $49k, rising as high as $49,344 on Coinbase. Bitcoin’s market cap stands at $910 billion, with the entire cryptocurrency market valued at $1.5 trillion. There is a momentum in the cryptocurrency market, that’s been building up for a while now. We’re seeing more apps that let users buy and sell cryptocurrencies using their dollars, fund managers moving more money to cryptocurrencies and big corporates using cash reserves to hedge their risk with bitcoin. An SEC filing by Tesla, which became public knowledge last week, kicked off bitcoin’s new price highs. Bitcoin, which was already climbing, soared after Tesla announced it had purchased $1.5 billion worth of bitcoin, with the company’s funds. The company also said that it plans on accepting bitcoin for payments in the future. Tesla made it clear in its filing, that it sees bitcoin as a chance to diversify its cash and cash-equivalent holdings. Tesla’s move confirmed, once more, what we already know: Bitcoin has finally moved from Silk Road to Main Street.

At the end of 2020, Tesla had $19 billion in cash and cash equivalents. Now almost 10% of its reserves went into bitcoin. When a large company like Tesla makes such an investment, it only makes sense if in the future, bitcoin eventually becomes a transactional security. While the investment itself is bold in sheer numbers, its importance is far reaching and I think it will remodel the way corporations set themselves up financially. It will add more trust and grow bitcoin as a store of value.

Late last December, business intelligence company MicroStrategy announced it also purchased over $1 billion in bitcoin. While MicroStrategy’s entry into the bitcoin made a lot of noise, Tesla took it a notch higher. Tesla is the fifth most capitalized US. company, with a market cap of over $800 billion.

There is no question that Michael Saylor and MicroStrategy believe in bitcoin, but they are also biased, with a billion riding on bitcoin. A move by a company like Tesla makes MicroStrategy’s position safer. In a tweet in December, Michael Saylor, the co-founder of MicroStrategy, recommended to Elon Musk: “If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC.” Elon subsequently replied, “Are such large transactions even possible?” Early this month, MicroStrategy also hosted a free virtual conference, which was a huge success with over 22,000 attendees. The conference aimed at educating other corporations on how to plug bitcoin into their balance sheet.

In the last three months, bitcoin has gained more than 180%, becoming a high-growth investment vehicle. Companies are starting to recognize the opportunity to use bitcoin as a form of payment and use it as an investment vehicle. For Tesla, there are at least two uses of bitcoin. One is as an investment to bolster the returns on their cash. The other is as corporate cash to facilitate consumer and commercial transactions internationally. As Tesla begins to use bitcoins in transactions, Tesla will benefit from their positive feedback loop and recognize the profits from their bet.

Yet, not everyone is going to follow Tesla and MicroStrategy into bitcoin. When GM’s CEO, Mary Barra, was asked about Tesla’s position in bitcoin, she responded: “… first of all, we don’t have any plans to invest in bitcoin, so full stop there. This is something we’ll monitor and we’ll evaluate. And if there’s strong customer demand for it in the future, there’s nothing that precludes us from doing that…”

Her statement sums up that Its going to take a lot more to get most of the hyper-conservative executives to add bitcoin to the portfolio. Keeping assets in liquid and safe investments is very important, especially when a crisis like a pandemic hits. But, I am sure that many big corporates remember getting burnt in high-yield investments in 2008, which looked safer than bitcoin.

Hopefully the big corporates will realize, that new thinking and approaches are necessary. With the current situation on both markets and shrinking central bank rates, both will become harder to justify. What was the most secure investment traditionally, might now only be the most secure to depreciate in value. Bitcoin’s market cap rose 370% in 2020 alone, 22% after the latest Elon pump, and as we are nearing the one trillion mark, the asset gets more attractive to institutional investors as small entities won’t be able to manipulate the price as easy.

Saylor did it. Dorsey did it. Musk did it. No one will blame the next CEO of being the first to buy bitcoin with the company’s treasury reserves and take unprecedented risk with shareholders money. I think it’s safe to say that the market’s bull run will probably intensify even more, as we see more corporates, one by one, join in and drive more demand, prodded on by Tesla’s major investment in the bitcoin.

So, what should you do?

Bitcoin launched in 2009 and investing $1,000 in bitcoins in 2010 would have been considered very risky. I am not going to tell you, that it would of been worth millions had you taken that risk. What I am going to tell you, is that if you bought $100 worth of bitcoin in the last year and held it, today it would be valued at:

Dec. 18, 2019 – $662 (BTC was $7,252.71)
Mar. 18, 2020 – $900 (BTC was $5,331.81)
Dec. 18, 2020 – $206 (BTC was $23,207.70)
Jan 18, 2021 – $128 (BTC was $37,286.51)

I am going to tell again, the same thing I’ve said many times before.

Forget about charts. Forget about how much it costs. Stop thinking it’s too late to buy. Stop trying to analyze and predict bitcoin’s price. Just put in a small amount of money. Buy what you can afford to forget. Buy consistently every month the same amount. HODL. You can’t lose, it’s a sure thing.

Ilias Louis Hatzis
Ilias Louis Hatzis
Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG.

Ilias Louis Hatzis is the founder and CEO at Kryptonio, a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Lundi 15 Février 2021