“Musk-mania” is here, and Bitcoin is surging once again. Crypto’s top coin hit a new all-time high today after Tesla (NASDAQ: TSLA) announced a $1.5 billion Bitcoin purchase this morning. Moreover, the electric automaker says it plans to accept Bitcoin as payment at some point.
That was enough to launch the digital currency past $44,000.
In Tesla’s filing with the SEC, the company claimed that the purchase would provide “more flexibility to further diversify and maximize returns on our cash.”
Musk ironically bought Bitcoin, an asset widely viewed as being high-risk, to reduce Tesla’s fiat currency-related risks moving forward. It’s a sound plan given that the U.S. government is doing everything it can to push inflation higher.
JonesTrading strategist Michael O’Rourke, however, isn’t convinced Tesla’s using its cash in the best way possible.
“Elon Musk has been a fan of Bitcoin and has been tweeting about it, but from a purely business perspective, there aren’t a lot of benefits from this decision,” he said.
“The question investors will have is whether $1.5 billion is material for Tesla. Tesla had a few share offerings last year and raised some cash, but I’d still think $1.5 billion is material, just because the assets are very volatile.”
And though the news caught many investors by surprise, Tesla’s Bitcoin gambit didn’t completely materialize out of thin air. It came about after noted crypto bull Michael Saylor exchanged tweets with Musk in late December last year.
“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,” wrote Saylor, co-founder of MicroStrategy.
To which Musk responded:
“Are such large transactions even possible?”
Saylor’s used his company to accumulate Bitcoin over the last several months. During that time, he’s encouraged others to do so as well.
MicroStrategy is one of the world’s top Bitcoin holders now. So is Tesla, which could continue to snap-up Bitcoin as the dollar weakens.
One month after Musk engaged with Saylor, he tweeted:
“In retrospect, it was inevitable.”
Some analysts now believe Musk was telegraphing Tesla’s eventual Bitcoin purchase. Others remain highly disappointed with his decision to even think about buying any.
“Musk is far too smart to be dumb enough to buy #Bitcoin,” tweeted crypto critic and gold bug Peter Schiff.
“It’s just a matter of time before you realize that too.”
TSLA shares jumped higher after the news broke. As of noon, TSLA’s up over 1.50%. If other S&P 500 companies also buy Bitcoin (like Saylor thinks they will now that Tesla’s done it), a broader, market-wide rally could result.
Investors are seemingly rewarding TSLA for converting some of its cash to Bitcoin. The rest of America’s top stocks may want in on that action as a way to boost share prices.
If that starts to happen and Bitcoin suddenly goes corporate, the current all-time high of roughly $44,900 would soon look like a bargain.
All while “no-coiners” are left on the outside of another crypto boom, forced to wait for the next dip.