Updated 26 Feb, 2021

Tesla’s $1.5 Billion Bitcoin Bet, What Does it Mean?

Key Takeaways:
  • $1.5bn worth of Bitcoin now into Tesla’s balance sheet
  • Tesla introduces Bitcoin to the S&P500 index

Tesla Goes Crypto

In early February Tesla revealed in a regulatory filing with the Securities and Exchange Commission that it had invested $1.5 billion in the largest cryptocurrency. Additionally, the EV maker said that it “may acquire and hold digital assets from time to time or long-term”. Elon Musk, the billionaire engineer behind the company, went even further and confirmed that Tesla is exploring the option to receive payment for Tesla’s electric cars in Bitcoin.

“In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity”, the 10-K filing stated. “As part of the policy, we may invest a portion of such cash in certain specified alternative reserve assets. Thereafter, we invested an aggregate $1.5 billion in Bitcoin under this policy”, the report continued.

What Does This Investment Mean for BTC?

The purchase of $1.5bn worth of Bitcoin puts Tesla in a strange and unfamiliar place. The company was recently introduced to the broad-based S&P500 index. The index tracks the stock performance of 500 large publicly traded companies and is so popular that one of the mainstream investment strategies is based solely on it, passive index investing. Tesla joined the S&P500 on Dec 21 and at the time it was the sixth-largest member, rubbing shoulders with big tech names such as Amazon, Apple, and Facebook. Tesla makes up about 2% of the $11.2 trillion in assets that flow in the benchmark index.

As the green energy pin-up decided to plough $1.5 billion of its cash reserves into Bitcoin, Elon Musk opened a new chapter. Tesla’s Bitcoin purchase means that investors who buy the S&P500 buy a piece of Bitcoin and are technically subdued to its wild volatility swings. Even though it’s a tiny portion, this is the formal introduction of crypto into the S&P500.

It was even rumored that for the month of February, as Bitcoin staged another dizzying performance, Tesla made over $1 billion in profits or more than it had made from selling electric cars in all of 2020.
The Bitcoin investment also raised some concerns over the company’s promise for sustainable technology. Critics argued that a company promoting green energy should consider the massive amount of energy used to produce Bitcoin. Regardless, the acquisition of Bitcoin by Tesla put a ton of weight behind the digital asset.