(Reuters) – Bitcoin took another big step towards mainstream adoption on Monday after billionaire Elon Musk’s electric vehicle company Tesla Inc revealed it had purchased $ 1.5 billion worth of cryptocurrency and would soon accept it as a form of payment.
The announcements, buried deep in Tesla’s 2020 annual report, saw a 10% rise in the world’s most used cryptocurrency. Investors expected other companies to soon join a list of companies that invest or hold in bitcoin, including BlackRock Inc, the world’s largest asset manager, and payment companies Square and PayPal.
Musk has rocked Wall Street in the past year and briefly became the richest person in the world as Tesla’s stock rose nearly 500% to become the fifth most valuable U.S. company, leading other companies and investors to love him. to follow.
“Had smaller mortals made the decision to put some of their balance in Bitcoin, I don’t think it would have been taken seriously,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York. “But if the richest man in the world does it, everyone should take another look.”
The news sparked heavy trading in cryptocurrencies and left exchanges like Coinbase, Gemini and Binance facing technical difficulties, Coindesk said here.
A well-known supporter of cryptocurrencies, Musk has regularly weighed in on last month’s frenzy in retail investment, as well as pushing up the prices of the meme-based digital currency dogecoin and stocks of US video game chain GameStop.
He said a week ago that bitcoin was “about” to be more widely accepted among investors, and asked in December if it was possible to make large transactions in the currency.
In late January, Musk changed the bio of his Twitter account, which has 46 million followers, with #bitcoin.
Tesla said in a filing that the decision was part of its broad investment policy as a company and aimed at diversifying and maximizing returns on cash, including holding gold. The report said it ended 2020 with $ 19.38 billion in cash and cash equivalents.
“We expect to accept bitcoin as a form of payment for our products in the near future, subject to applicable law and initially on a limited basis, which we may or may not liquidate upon receipt,” the company said.
Tesla said it had invested a total of $ 1.5 billion in bitcoin under the changed policy and could “acquire and hold digital assets from time to time or in the long term.” (bit.ly/3q53p1m)
Gold jumped more than 1% on Monday as ethereum, another cryptocurrency, rose to an all-time high.
LONG-TERM STORAGE OF VALUE?
Central banks remain skeptical of digital currencies, but analysts say the more real-world usage emerges for bitcoin, the more attractive it will prove to be a long-term store of value.
Bitcoin was up more than 10% to a record high of $ 43,625 after Tesla’s announcement.
“The argument for bitcoin is evolving. It used to be negative (reasons to buy), but suddenly there are positive reasons, and that’s why you see bitcoin on (new highs), ”Mohamed El-Erian, Allianz’s chief economic adviser, told CNBC.
Tesla is the latest company to add bitcoin to its corporate treasury, following similar moves by Square, the payment company led by Twitter Inc chief Jack Dorsey and US software company MicroStrategy Inc.
PayPal said in October that it would allow customers to buy, sell, and hold bitcoin and other virtual coins using its online wallets. It remains to be seen if bitcoin will see greater adoption as a form of payment, something it has traditionally struggled to achieve.
“If this becomes a trend in corporate treasuries, the downside of staying on the sidelines will only get more expensive over time,” said Maya Zehavi, a blockchain consultant.
Image: Bitcoin hits record high on Tesla investments
Musk has also underwritten other cryptocurrencies. He shouted dogecoin, the coin based on a popular internet memo, on Twitter last week, sending its price to record highs over the weekend.
Made largely as a satirical critique of the crypto frenzy of 2013, Dogecoin is not taken as seriously as bitcoin or ethereum. It has nearly doubled in value since Friday, hitting a record 8.71 cents, according to data on blockchain and cryptocurrency website Coindesk.
(This story continues to fix typographical errors)
Reporting by Subrat Patnaik in Bengaluru and Thyagaraju Adinarayan and Anna Irrera in London; Written by Patrick Graham; Editing by Bernard Orr, Saumyadeb Chakrabarty and Nick Zieminski