Bitcoin hits $ 60,000, which means Tesla has made a lot of money

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Bitcoin traded above USD 60.00 on Saturday. That means Elon Musk’s bet on the cryptocurrency has been netted

Tesla

more than a billion dollars.

Bitcoin, which trades continuously on cryptocurrency exchanges, is up 5% in Saturday morning trading to around $ 59,800. Bitcoin traded up to $ 60,409 on Saturday. That leaves the cryptocurrency up about 107% so far and 1,000% in the last year.

Tesla (ticker: TSLA) disclosed a $ 1.5 billion investment in Bitcoin in its annual report filed with the Securities and Exchange Commission in February. It’s hard to know exactly what Tesla paid for Bitcoin, but prices were around $ 33,000 at the time.

At $ 60,000, Tesla is up about $ 1.2 billion in its business. That’s almost a new factory that could produce hundreds of thousands of Tesla vehicles per year.

Tesla spent approximately $ 1.3 billion on capital goods in 2019, the year it set up its Shanghai facility. That is only an approximation of the costs for new installations. Tesla spends money on other assets. Different factories in different regions cost different amounts and do different things. In addition, capital expenditures fluctuate from year to year. Still, it shows how much Tesla has made from its crypto bet.

Companies always invest excess cash in safe, short-term securities such as treasury bills. Bitcoin is a currency-like asset, but it is highly volatile, unlike options that most finance departments of companies would use to manage their cash balances. Bitcoin may be riskier than a Treasury bill, but so far it’s been hard to argue against the results.

Tesla’s market value has continued to fall since the Bitcoin investment was announced. The stock is down about 20%, from about $ 863 a share to $ 694, wiping about $ 161 billion from the company’s market cap.

However, concerns about risk than average cash management have little to do with the downturn. Interest rates are a bigger factor. The return on the US 10-year Treasury has increased from less than 1.2% to about 1.6% since the Bitcoin investment was announced. That 0.4% rise has hurt growth stocks.

The

Nasdaq Composite,

home to many wealthy growth companies, is down nearly 5% over the same period. The

Dow Jones Industrial Average,

by comparison, it is up more than 4%.

For a number of reasons, higher interest rates have hit growth stocks more than other stocks. Fast-growing businesses often need money to grow, and financing growth is more expensive in a higher-rate environment. Fast-growing companies also generate most of their cash flow well into the future. Future cash flow is worth a little less in relative terms when investors can earn higher returns on their investment dollars today.

Write to Al Root at [email protected]