The big news is that Tesla bought 1.5 billion dollars in bitcoin and plans on accepting it as a form of payment. But why would Elon Musk do this?

On Monday, electric car manufacturer Tesla revealed that it had invested $1.5 billion in bitcoin, making it the highest investment in the most common cryptocurrency by a mainstream company. Moreover, in a filing with the US Securities and Exchange Commission (SEC), the firm also noted that it expects to continue to embrace the digital currency as a payment method for its goods in the future. The bitcoin rate skyrocketed to an all-time high shortly after Tesla’s launch, breaking the $44,000-mark for the first time.

But Why Tesla invested in bitcoin?

The corporation pointed out in its Securities and Exchange Commission filing that it revised its investment strategy last month
in order to be more agile in further diversifying and optimizing the returns on its empty cash. Elan Musk said that it would invest in some “alternative reserve assets, including digital assets, gold bullion, gold exchange-traded funds” and other assets as part of this strategy. Subsequently, through this strategy, we invested a total of $1.50 billion in bitcoin and would accumulate and retain digital assets from time to time or in the long term. In addition, in the near future, subject to relevant legislation and initially on a limited basis, we plan to begin accepting bitcoin as a means of payment for our goods, which we may or may not liquidate upon receipt,” He said.

In its earnings report for the fourth quarter released last month, Tesla said it had cash and cash equivalents of $19.4 billion.

What incentive for investment does bitcoin present to Tesla?

Bitcoin’s supporters did not wish for it to be used as a commodity, but the currency became one with the mushrooming of markets where it could be quickly bought and sold. Orthodox finance analysts have even warned about Bitcoin as an investment, but not in the same method. Market analysts claim that, for any significant underlying explanation, the tremendous uncertainty in
the price of bitcoin is a consideration that institutional buyers should be vigilant regarding. See my article below on What is Bitcoin

What is there for Tesla?

Crypto traders and investors see the investment as a major move in favor of bitcoin’s institutional growth, to begin with. It’s a sign to other businesses that for any balance sheet, bitcoin is a solid reserve asset, Tesla’s investment, however, is also a testament to the support of its CEO Elon Musk for cryptocurrencies such as bitcoin, the price of which rose after changing his Twitter bio to read “#bitcoin.

Red-flags about Musk’s social media presence on cryptocurrencies have also been raised by the announcement of Tesla investing in bitcoin. “The move raised immediate questions about the behavior of CEO Elon Musk on Twitter in recent weeks, where he was credited with increasing the prices of cryptocurrencies such as bitcoin and dogecoin by posting positive messages that encouraged more individuals to purchase digital currencies,” CNBC stated.

How risky is an investment in bitcoin?

According to Tesla’s own admission in its SEC filing, digital asset values have been and will continue to be extremely unpredictable in the past, even as a consequence of numerous threats and uncertainties associated with them. The proliferation of such properties, for example, is a relatively recent development, and their long-term acceptance by buyers, customers, and companies is uncertain.

In addition, their lack of physical shape, their dependency on technology for their growth, life and transactional validation, and their decentralization could put their credibility at risk of malicious attacks and technical obsolescence. Finally, the degree to which securities legislation or other rules will extend to such properties or may apply to them in the future remains uncertain and may change in the future. “If we retain digital assets and their values decline relative to our purchase prices, our financial situation may be impaired,” Tesla said.

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