What could happen if Tesla sparks a bitcoin goldrush?

This article was first published on Silicon Republiccryptocurrency – Silicon Republic

A version of this article was originally published by The Conversation (CC BY-ND 4.0)

After Tesla announced it had invested $1.5bn in bitcoin and expects to start accepting the cryptocurrency as a payment for its electric vehicles in the near future, the bitcoin price went soaring. It went from around $39,400 to an all-time high of more than $48,000 in less than 24 hours.

The price of bitcoin is now up by over 50pc in the first six weeks of 2021. Led by Elon Musk, Tesla’s investment is obviously in profit already: depending on the exact day of the purchase, it is likely to be worth more than $2bn, pointing to a paper profit upwards of $500m. To put that in context, when the electric car-maker made its first ever annual net profit in 2020, it was just above $700m.

‘This is very different to standard money management’

Tesla’s move into bitcoin comes on the back of a wave of institutional money invested in the leading cryptocurrency in recent months, plus numerous other companies putting it into their treasury reserves. With Tesla, the world’s fifth most valuable company, now saying it might buy and hold other digital assets “from time to time or long-term”, it must be tempting for other major companies to do likewise.

Since the Tesla announcement, Twitter finance director Ned Segal has already signalled that his company is considering such a move, while a research note from the Royal Bank of Canada has made a case for why it would benefit Apple.

The prospect of a blue-chip invasion into bitcoin has caused much excitement among cryptocurrency investors. But if Tesla does trigger such a goldrush, there will also be some unsettling consequences.

The price of bitcoin investment

Tesla justified this ...

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