Tesla & Bitcoin : The Bad part of Good Story

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 What happened?

Tesla announced their investment of $1.5 Billion in Bitcoin along with that co. also intends to accept biggest crypto currency as a form of payment for their products and services. Bitcoin so received against product and services may or may not liquidate . So Tesla became first non-fintech Fortune 100 company to load up on bitcoin 

Here is the snapshot of this mega news from Tesla’s annual report 






The Reactions from all over the world:

1.Bitcoin price jumped to an all-time high of above $48,000 on Tuesday morning as investors rushed into the asset after Elon Musk‘s Tesla said it had bought up $1.5 billion of the cryptocurrency. The news led to surge in Tesla’s Bitcoin investment by $561 million (37% gain).

2. Other major cryptocurrencies, such as ethereum, tether and ripple, were also trading up to 3% in the green

3. “You’re going to see every company in America do the same thing [as Tesla],” Novogratz, the founder of crypto investment firm Galaxy Digital, told Bloomberg.


4.Derek Halpenny, head of global markets research at MUFG in Europe, said of Tesla’s move: “Any steps taken that has the potential to improve credibility and lift bitcoin as a more viable means of exchange is going to be positive.

5. Brian Estes, chief investment officer at Off the Chain Capital predicts bitcoin could hit between $100,000 and $288,000 by end-2021

6. MicroStrategy CEO Michael Saylor, an ardent BTC supporter, called the cryptocurrency, the “scarcest asset in the world.

7. I’m sure a lot of thought went into bitcoin purchase by Tesla and I look forward to learning the rationale,” according to Baron, the CEO, chairman and portfolio manager of Baron Funds



THE BAD PART: 

1. So we have 3rd category for Tesla : whether its Bitcoin Investment Co. ( earlier two : Automobile Co & Tech Co.)

2.Tesla is now subject to additional risks like balance sheet erosion, as the current value of the company’s $1.5 billion bitcoin investment as a percentage of the company’s 2020 year-end cash and cash equivalents is $19.4 billion.  Still, it has less cash on hand than automakers like, say, Ford has $31 billion in cash.

3. So far, Tesla has benefited from its bitcoin investment, but there’s no telling how long that will last. The cryptocurrency regularly sees large changes in value to the upside and downside, such as its collapse from roughly $20,000 to $3,000 between December 2017 and December 2018. That kind of loss could devastate Tesla’s balance sheet.

4.Raises the question of whether corporations like Tesla, if it takes payment in crypto, would be subject to the Know Your Customer (KYC) and anti-money laundering rules that govern the financial services industry.

5. Accepting bitcoin for the latest Model Y may invite increased scrutiny from a bevy of U.S. regulators keen to make sure that the payments don’t come from terrorists or money launderers

6. Tesla’s bitcoin investment could leave it open to cyber attacks from hackers seeking to steal the company’s holdings. Hundreds of millions of dollars in cryptocurrencies were stolen throughout 2020 through various cyberattacks and scams

7. Tesla, which is ostensibly meant to reduce carbon emissions by taking fossil fuel-powered vehicles off the road, and investing in a cryptocurrency like bitcoin, which requires massive amounts of energy to mine. As interest in bitcoin continues to grow, mining becomes more difficult for the computers tasked with the operation, consuming even more energy. That energy drain radically conflicts with Tesla’s mission to “accelerate the world’s transition to sustainable energy


Whats Fueling Bitcoin rally

1. Tesla Investment in Bitcoin

2. Mastercard 

Mastercard singled out so-called “stablecoins,” which often peg their value to that of another asset, such as the U.S. dollar. Mastercard has already partnered with crypto card providers such as Wirex and BitPay, but has required digital currencies to be converted into fiat before processing payments for transactions on its network.Mastercard is also “actively engaging” with central banks around the world on their plans to launch new digital currencies, the company said in a blog post on Wednesday.

3. Bank of New York Mellon Corp. 

BNYMC said Thursday it will hold, transfer and issue Bitcoin and other cryptocurrencies for institutional customers.





So, BAD for Tesla but Good For Bitcoin

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Beat The Street

Beat The Street

Beat The Street is a Financial and capital market-based blogger & Youtube platform that is managed and owned by Nimish & Sudarshan who have worked for big consultancy firms as research analysts. Both have a deep knowledge of the capital market and economy and having experience of more than 5 years in this field. Their aim is to bring unique and curated analysis to investors and the public so that they can make informed decisions. They share their analysis and opinion via youtube and blog.
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