Tesla Will Prove To Be Bitcoin’s Great Experiment

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Tesla Will Prove To Be Bitcoin’s Great Experiment
<a href="https://pixabay.com/users/lobpreis/">lobpreis</a> / Pixabay

Following today’s news (8 February 2021) that Tesla has purchased $1.5bn worth of bitcoin and will become the first major carmaker to accept the cryptocurrency as a form of payment.

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Q4 2020 hedge fund letters, conferences and more

Tesla Now Accepts Bitcoin As A Form Of Payment

Danyaal Rashid, Head of Thematic Research at GlobalData, offers his view:

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“This is a massive move by Tesla. By accepting bitcoin as a form of payment, Tesla is unleashing the first major consumer experiment in not just bitcoin but cryptocurrency as whole. Tesla, being the fifth largest company in the world by market cap, will send out a bold statement if it can successfully integrate bitcoin payments into its business.

“Tesla has topped GlobalData's Automotive thematic scorecard, which ranks companies based on how they will be affected by various industry themes, since before 2019. The firm has remained on top of the scorecard for the past two years by investing in emerging technologies such as electric vehicles (EV) and batteries. Cryptocurrencies could represent Tesla’s next foray into disruptive themes.

“The main sticking point will be the volatility of the cryptocurrency. The firm cannot accept $35,000 for a Model 3 today and then $29,000 tomorrow - it is just not good business. In bitcoin, swings of 10-20% in price in a matter of days are not uncommon. However, if adoption of bitcoin becomes more widespread, volatility is likely to fall.

“If Tesla were to fail in successfully implementing bitcoin, it could be a detrimental blow to the cryptocurrency, signalling to investors that it has no future as a payment mechanism. A further worry for the cryptocurrency is that the purchase of $1.5bn of bitcoin by a single actor in a public manner has sent the price through the roof. Bitcoin jumped over 15% to a new high of $44,000 on Monday. This sort of hype-based price power should be worrying to investors and consumers alike - especially if this is to be used as medium of exchange. If Elon Musk can help dictate the price of this asset with a tweet or large order, the same could happen to send the price back down. The task of purchasing a vehicle should not be speculative. Consumers who may have thought of buying bitcoin to use as a substitute for fiat – could very easily end up with more or less than they bargained for.”


About GlobalData

4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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