Tesla Facing “Immense” Risks With Its $1.5 Billion Investment In Bitcoin

Recently, a regulatory filing revealed that Elon Musk’s Tesla had invested $ 1.5 billion in bitcoin and the company was preparing to start accepting cryptocurrencies as payment for its electric vehicles. However, some cryptocurrency experts are emphasizing how bad a Tesla bitcoin investment is. In particular, the investment exposes Tesla to the “immense” risks that characterize the value of bitcoin. Tesla may liquidate its entire annual profit as a result of the changing price of bitcoin.

The news of Musk and Tesla’s bitcoin investment soared the price of “BTC”. As of this writing, a single bitcoin costs $ 49,317.60.

Nevertheless, cryptocurrency analysts and experts could not help but point out the extreme volatility of the Bitcoin price. The prevailing sentiment is that Musk has dramatically increased Tesla’s risk.

Peter Garnery, head of equity strategy at Saxo Bank, said: “In our view, the move by Tesla is both risky and disrupting the valuation of the company. With the volatility in bitcoin, Tesla easily lost 50% on its $ 1.5 Can experience. Investing billions. “

A dramatic drop in the value of bitcoin would result in a $ 750 million loss on Tesla’s books. For perspective, Tesla’s overall profit in 2020 was $ 721 million.

Britta Pederson-Pool / Getty Images

Regulatory filings filed by Tesla indicate that it will hold bitcoin as a long-term intangible asset. However, accounting rules in the US mean that Tesla only has to recognize gains in value when the company sells bitcoins.

Most Tesla shareholders own the stock because they expect the company to make money by selling their innovative electric cars, not by trading cryptocurrencies with capital provided by shareholders. On the other hand, fans of bitcoin believe that Tesla’s investment will increase the value of bitcoin.

As of this writing, Tesla shares are $ 816.12.

Bitcoin continued to break records, thanks in part to Elon Musk. AMusk is also tweeting about another cryptocurrency called DogCoin, which has increased its market capitalization to $ 7 billion as of this writing.

Musk is valued at $ 205 billion. He is the richest person in the world. A year ago, he was “just” worth $ 25 billion. Elon Musk’s net assets come from two primary sources: he holds a 48% stake in privately held SpaceX and a 20% stake in publicly traded Tesla.

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