Elon Musk loves to gamble, though gamble may be a strong word for what he does. Perhaps “educated guess” better describes what Musk does. His latest “educated guess” came yesterday when Musk and his company Tesla announced that they were purchasing $1.5 billion worth of bitcoin. Following that announcement was another, that Tesla would now be accepting Bitcoin payments in exchange for its products.
In the first announcement by Musk and Tesla and their filing with the Securities and Exchange Commission of the $1.5 billion bitcoin purchase, they said via CNBC that it was bought to provide “more flexibility to further diversify and maximize returns on our cash.” This $1.5 investment into bitcoin represents a large percentage of Tesla’s cash. According to Tesla’s most recent filing at the end of 2020, the company had $19 billion in cash and cash equivalents.
Included in their most recent filing is Tesla announcing the acceptance of bitcoin as payment for their product. While no specific timeframe has been announced, Tesla did say via CNN that they expect “to begin accepting bitcoin as a form of payment for our products in the near future … initially on a limited basis, which we may or may not liquidate upon receipt.”
Upon Musk’s announcement of the Bitcoin purchase, the stock value jumped 13%. But Bitcoin isn’t the only cryptocurrency that Musk has his sights set on. Dogecoin is another. What initially started out as a joke is now becoming one of the world’s most highly valued cryptocurrencies. What started as a picture on a racecar at the Sonoma Raceway in California, then a tweet as a joke eventually turned into a cryptocurrency worth $2 billion. With Musk and a few other celebrities (Snoop Dogg and Gene Simmons) Dogecoin is continuing its rise in cryptocurrency.
It should be noted, though, that even though Musk has publicly endorsed both Bitcoin and Dogecoin, Tesla is only accepting Bitcoin as a form of payment. As of yesterday (February 8, 2021), one Bitcoin was worth $43,700, which comes in a bit more than the starting price for Tesla’s least expensive car on the market, the Model 3. You can grab yourself a Model 3 starting with its base price of $37,690. Of course, there are more expensive Tesla models, the Model S sedan and the Model X SUV, whose prices can jump well above the $100,000 mark depending on the various options one would like to include with their purchase.
It was two weeks ago that Musk decided to add the hashtag #bitcoin to his Twitter profile that, at the time, had pushed the price of the cryptocurrency up 20%. Two days later, Musk took to the social media chat site Clubhouse finally backing the cryptocurrency by writing, “I do at this point think bitcoin is a good thing, and I am a supporter of bitcoin.”
Musk has found himself in plenty of hot water in the past with his market-moving tweets. In 2018, Musk was charged with fraud by the SEC for tweeting out that he is taking his company private at $420 a share. Ultimately, Musk was able to settle with the SEC, as they forced him to give up his role as the chairman of Tesla’s board, pay a $20 million fine, which was in addition to another $20 million he had to pay for the company itself.
Right now, the SEC has been quiet on Musk’s tweets concerning Bitcoin and Dogecoin but don’t expect them to remain quiet for long.