Tesla Inc will accept payments for its vehicles through the cryptocurrency Bitcoin confirmed the company’s chief executive officer Mr. Elon Musk in a tweet today. The shift comes as the company invested $1.5 billion in bitcoin earlier this year and follows through on the commitment that it made in its filing with the Securities and Exchange Commission (SEC) which disclosed the decision.
“You can now buy a Tesla with Bitcoin,” tweeted Musk, who was officially made the “Technoking of Tesla” this month.
People outside the U.S. will be able to buy a Tesla with bitcoin “later this year,” Musk said, without specifying which countries.
You can now buy a Tesla with Bitcoin
— Elon Musk (@elonmusk) March 24, 2021
A support page on Tesla’s website explains how customers can pay for a Tesla using the digital currency. The company’s electric vehicles typically cost between $37,990 and $124,000 before tax.
Tesla Will Use Internally Developed Software To Accept Bitcoin Payments and Retain The Currency In Its Holdings
The decision to use the digital currency for its products will end up contributing to Tesla’s current portfolio of the cryptocurrency as Musk also announced that the payments his company receives via the currency will not be converted into another form and will instead remain as bitcoins. Bitcoin support is limited to Tesla’s customers residing in the United States for the time being, with support for international buyers slated to come later this year stated the executive late in the night
Tesla’s shift to bitcoin preceded Musk’s tweets which came around 03:00 ET today. Its website started to display the cryptocurrency as a medium of payment roughly an hour before the announcement, with users on the social media platform sharing screenshots of the change. However, bitcoin support on the Tesla website does not appear to be ubiquitous.
With the shift, Tesla, whose chief is known for his support of digital currencies and whose comments have often caused prices of the currencies to go up, becomes one of the first large U.S. companies to make the switch to bitcoin. This switch will inject confidence into bitcoin, which has seen doubts regarding its credibility as a mainstream currency consistently surface even as it regularly breaks price records.
By deciding to accept bitcoins after it invested in the currency, Tesla will have adequate liquidity for the currency, but since it will retain its payments as they are, this will unlikely have any major benefit.
Bitcoin price increase after Elon Musk’s tweet
In the time that had elapsed since the announcement, Bitcoin’s price had soared by 4% as it crossed $56,000 at 04:30 EST today 24th March 2021. Musk’s support for the currency has often caused price shifts as well, and it’s unsurprising that the announcement made today has also caused the price to go up.
The new price shows bitcoin’s potential to make rapid gains in a short period of time, as one unit of the currency was worth $44,000 when Tesla announced its bitcoin portfolio in February last year. This volatility has been a major contributing factor behind the skepticism that continues to surround bitcoin.
Tesla’s share price is slightly up in pre-market trading with the automaker up b 1.2% at 04:34 EST. Following its earlier portfolio announcement, the stock had gained roughly 2%, even as Tesla cautioned investors about Bitcoin’s volatility in its SEC filing.
Bitcoin’s impact on the tech industry has come in many forms. One of these is creating a vacuum in the market for graphics processing units (GPUs) which are used by both video game players and currency miners. Used GPUs which flooded the market following the drop in interest in the currency a couple of years back caused companies such as NVIDIA Corporation and Advanced Micro Devices, Inc inventories’ to move out of sync with the market creating losses as a consequence.
As it launched its latest RTX 30 GPU lineup last year, NVIDIA had to consistently answer questions about how it planned to predict and manage the demand for its products from cryptocurrency miners. However, even as it set mining limits to its products such as the RTX 3060, these were bypassed by miners who are using innovative ways such as liquid and minera-oil cooling for their mining setups.
Musk’s embracement of bitcoin
Tesla’s image as an environmentally-friendly car company sits at odds with the bitcoin network’s colossal carbon footprint. Researchers at the University of Cambridge found that it uses more electricity on an annual basis than the whole of Argentina. A 2018 paper published in Nature, arguably the most prestigious academic journal in the world, found that bitcoin emissions alone could push global warming above 2 degrees Celsius.
Despite its poor environmental credentials, Musk has embraced bitcoin more than any other major tech CEO. He has been tweeting about the cryptocurrency on and off over the last few months, raising alarm bells in some corners. He’s also been tweeting about other coins like ether and dogecoin.
Tesla’s share price is now directly tied to the value of bitcoin.
“Musk is now tied to the bitcoin story in the eyes of the Street and although Tesla made a billion paper profit in its first month owning the digital gold, it comes with added risk,” Ives told CNBC via email.
Tesla’s share price and the value of bitcoin have seen huge gains over the last 12 months, with Tesla shares rising from around $100 to over $600, and bitcoin rising from around $7,000 to over $55,000.
Some investors, however, are convinced that Tesla and bitcoin are both in bubble territory.
Bitcoin has gained wider acceptance from Corporate America over the past year as investment firms have parked more cash in the cryptocurrency. BlackRock Inc. and Morgan Stanley are among the Wall Street firms that have begun to dabble in the cryptocurrency.
MicroStrategy Inc., meanwhile, has led Corporate America’s charge into bitcoin, which has also been joined by digital-payment company Square Inc.
Microstrategy has plowed $2.171 billion cash into the cryptocurrency to purchase 90,531 bitcoins as of Feb. 24. The company’s CEO, Michael Saylor, was instrumental in Musk’s decision to invest Tesla’s cash in the digital currency.
“If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC,” he tweeted in December. ”Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor.”
If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to #BTC. Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor.
— Michael Saylor (@michael_saylor) December 20, 2020
Tesla’s market value soared to over $800 billion in the 12 months leading up to January, before dropping to less than $600 billion in February. It now stands at around $635 billion.