According to Wedbush Securities analyst Daniel Ives, who estimated that the business has already made about $1 billion in paper earnings from its venture, investing in Bitcoin is already paying off for US automaker Tesla.
Back in January, in an attempt to “further diversify and maximize returns” on its capital, the company revealed that it had bought $1.5 billion worth of Bitcoin. Tesla also said that in the future the cryptocurrency will begin to be accepted as payment for its electric vehicles on a limited basis.
In a recently published note shared with CNBC, Ives clarified that Tesla’s investment is already paying off and that when it comes to diversifying their assets, other public corporations may follow suit, saying:
“Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EV (electric vehicle) cars in all of 2020. While the Bitcoin investment is a sideshow for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months.”
The rise of Bitcoin
Bitcoin has seen a massive increase over the past year up before the beginning of 2021, as the price of one coin increased from $7,347 in January 2020 to a recent peak of $57,489 on February 21 of this year. In fact, for the first time, Bitcoin’s market cap recently crossed $1tn and the cryptocurrency is up 94 percent year-to-date so far.
While Ives did not explain how he reached his calculations when it came to Tesla’s Bitcoin investment reaching $1 billion already, based on CoinDesk data, the cryptocurrency went from a high of $34,793 on January 31 to a high of $57,487 on February 20, which was the day his note was published.
Although Tesla CEO Elon Musk has been a strong supporter of Bitcoin and even Dogecoin online, he contrasted cryptocurrencies to fiat currencies in a recent series of tweets, saying:
“Tesla’s action is not directly reflective of my opinion. Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company. To be clear, I am *not* an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla. However, when fiat currency has a negative real interest, only a fool wouldn’t look elsewhere. Bitcoin is almost as bs as fiat money. The keyword is ‘almost‘.”
Only time will say whether other major corporations plan to follow in the footsteps of Tesla or not, but their decision to invest in Bitcoin has paid off handsomely so far.