Tesla buys into bitcoin in a big way

Tesla has spent over $1.5bn on bitcoin, driving the price higher, and says it will accept the cryptocurrency as payment for its cars.

Following Elon Musk’s promotion of bitcoin on Twitter, his company Tesla spent $1.5bn on it in January, say Caitlin Ostroff and Rebecca Elliott in The Wall Street Journal. 

This is part of a move to invest its reserves in a wider range of assets, including gold, in order to “diversify and maximise returns” on any cash “not required to maintain adequate operating liquidity”. Tesla has also said that “it expects to start accepting bitcoin as payment for its products soon”. 

Few companies are likely to follow Elon Musk, say Richard Waters and Eric Platt in the Financial Times. The whole point of having corporate reserves is to protect a “company’s financial liquidity”, so any cash on hand tends to go into “very high-quality, short-term fixed-income securities” rather than into a “risky asset such as bitcoin”, which could experience “significant declines”. 

Even accepting bitcoin as a means of payment won’t be easy, as the mechanics of converting bitcoin into a $58,000 Tesla Model 3 “may be far more trouble than people think”, says Edward Robinson on Bloomberg. 

This is because the customer and Tesla will have to agree on an exchange price “for one of the most volatile assets in the world”. Indeed, with even dedicated fans finding it “too impractical to use” for everyday transactions, it is unlikely that most consumers “will truly embrace assets that can lose 10% of their value in a day”. Still, at least Musk and Tesla are attracting “a lot of headlines”, which may be the real reason for the bitcoin purchase.

Recommended

What happened to Credit Suisse?
Economy

What happened to Credit Suisse?

UBS acquired Credit Suisse at £2.65bn on Sunday afternoon – significantly below its closing value on Friday, which was around £7bn. We take a look at …
20 Mar 2023
Can I avoid IHT by stuffing all my money into a pension?
Personal finance

Can I avoid IHT by stuffing all my money into a pension?

The ditching of the lifetime allowance could enable millions of pension savers to avoid inheritance tax. We explain how.
20 Mar 2023
Profit from the rise of shareholder activism in Japan’s small companies
Share tips

Profit from the rise of shareholder activism in Japan’s small companies

A professional investor tells us where he’d put his money. Daniel Lee, head ofJapan Research, AVI Japan Opportunity Trust, highlights three promising …
20 Mar 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

The Bank of England has many things to consider ahead of its decision later this week.
20 Mar 2023

Most Popular

Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Share tips of the week – 17 March
Investments

Share tips of the week – 17 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
10 Mar 2023
How to make your child a tax-free millionaire by age 37
Investments

How to make your child a tax-free millionaire by age 37

Exclusive research for MoneyWeek reveals how funding an ISA and a pension for your child until age 18 could build up a seven-figure sum by the time th…
14 Mar 2023