Tesla buys Bitcoins for $1.5 billion – what does it mean for the crypto-space?

Mads Eberhardt 400x400
Mads Eberhardt

Cryptocurrency Analyst

Summary:  Yesterday, Tesla announced their buying of Bitcoins for $1.5 billion. Tesla is joining other publicly traded US-based companies - e.g., MicroStrategy and Square - in buying Bitcoins for their treasury. We look into how it affects the crypto-space.


At the end of 2020, MicroStrategy was the first prominent publicly-traded company announcing their buying of Bitcoins. To date, MicroStrategy has bought Bitcoins for over $1 billion, holding over 70,000 Bitcoins at the time of writing. Since they first bought Bitcoins in September 2020, the MicroStrategy stock is up by over 500%. In October, the American payment processor Square joined MicroStrategy by buying Bitcoins for $50 million. MicroStrategy’s co-founder and CEO, Michael J. Saylor, has been extremely outspoken about Bitcoins since their first Bitcoin purchase, even organizing a conference some days ago educating organizations about holding Bitcoins on their books. The conference was allegedly joined by several thousand companies. Michael J. Saylor has often talked about Bitcoin as a mean to escape inflation as the Bitcoin supply is fixed – something that cannot be said about the fiat supply.

Elon Musk has been talking positively about Bitcoins for months

Elon Musk has for years been talking – or mostly, tweeting – about Bitcoins. Nonetheless, it has never been more than it is now, practically poking fun of the space with his continuous comments on Dogecoin. However, his tone changed some months ago to be more positive on Bitcoin. Some weeks ago, he mentioned that Bitcoin is a good thing – and stated himself as a supporter. He added that he is “late to the party” while updating his Twitter-biography to only subsist of #bitcoin. In a tweet in December, he even asked Michael J. Saylor whether “such large transactions are even possible?

The Tesla-Bitcoin story was going to happen

With Elon being Elon and his above history with Bitcoin the previous months, the Tesla-Bitcoin story was going to happen, and so it did. The saga about companies putting Bitcoins on their treasuries culminated yesterday as Tesla announced that they have bought Bitcoins for $1.5 Billion. Even though the story was expected to some extent, without offending anyone, the inflow from the company into Bitcoin must have surprised even the most bullish Bitcoin maximalists as it was considerably heavy. Tesla is for sure taking on a significant degree of risk as Bitcoin continues to be both a volatile and risky asset, at least for the foreseeable future. At the same time, Tesla announced their intention to receive Bitcoin as payment for their cars and energy-products in the future.

Other companies will likely follow

Elon Musk is arguably the most prominent person worldwide – and Tesla is one of the most coveted companies with the press watching their every move. Yesterday was no exception as the story broke in close to every media globally. In my opinion, it was the single-most exciting news for this space since the release of Satoshi Nakamoto’s Bitcoin whitepaper back in 2008. The market had the same impression as the Bitcoin price instantly rose by 10% and today tested a new all-time-high of $48,200. Elon Musk immediately removed the Bitcoin hashtag from his Twitter-biography after the news broke, perhaps not to get in any trouble with the SEC.

Based on Tesla’s buying of Bitcoins and MicroStrategy’s conference, other companies will most likely follow their lead. Whether it is to escape inflation, the Federal Reserve’s money-printing, or to gain widespread press coverage, further publicly traded companies are expected to follow by putting Bitcoins on their balance sheet.

Will the FED or others address the Bitcoin buying?

Along with other central banks, the Federal Reserve cannot be pleased with yesterday’s news, particularly if it becomes the norm for companies to buy Bitcoin with their savings. If that will be the new normal, the immense concern should be how the central banks and other governmental organizations will react. Ultimately will they address it by making it illegal or not addressing it at all, letting companies hold Bitcoins as they please? As the regulation and the reactions from governmental organizations worldwide are still unknown, the bet to buy Bitcoins for especially companies is remarkably risky.

Does Bitcoin align with the Tesla philosophy?

Another element that I personally miss in the discussion is whether Bitcoin is an asset which fits into the Tesla philosophy. As I wrote last week, the Bitcoin-network is exceedingly increasing the energy demands for processing transactions on the network and mining new Bitcoins. It is estimated that one Bitcoin transaction generates the CO2 equivalent to over 700,000 Visa transactions. As Tesla’s mission is “to accelerate the world’s transition to sustainable energy”, the matter is whether Bitcoin legitimately fits into that philosophy. Hence, is it for Tesla worth to take on a lot of financial risks –and more importantly, to risk their brand and philosophy to gain press coverage now and here and potentially escape inflation?

09_MAEB_BTC
BTC against USD. Source: CoinMarketCap.

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.