How Tesla is shaping the future of Bitcoin
Let’s face it, after the past few months, Bitcoin will never be the same again. Because as he has done for the auto industry and space exploration programs, Elon Musk is innovating the way the first digital currency is perceived on the world stage.
Like the “Oracle of Omaha,” as billionaire investor Warren Buffett is known, when Musk speaks, the market moves. The price of Bitcoin jumped after Musk announced in February that the electric car company invested $1.5 Million in the crypto coin. And it moved again this week on one simple tweet: "You can now buy Tesla with Bitcoin."
The impact of this announcement goes beyond the electric car enthusiast market. It’s setting up Bitcoin to be a true competitor to the currencies issued by central banks and governments.
Think about this: when the first Bitcoin was mined in January 2009, do you think anyone would have accepted it as payment for a new car? Exactly.
Beyond the hype of the “buy a Tesla with your Bitcoin” announcement, Musk is also breaking new ground by announcing the company will hold onto those digital coins.
“Typically, the rare merchant that accepts crypto as payment for goods or services will swap it right away for U.S. dollars or another fiat currency,” a Coindesk Contributor explains.
“That’s understandable, given the price volatility and the low likelihood that a merchant’s suppliers would take magic internet money. But the Tesla chief said his company is HODLing.” (HODLing is Bitcoin slang for hanging onto your coins.)
For a company with a $700 billion market cap, the move may seem a drop in the bucket, but for those who have believed in Bitcoin all along, it’s an affirming moment.
"Tesla's decision to both accept payment for its cars in bitcoin and hold that bitcoin on its balance sheet rather than convert it to dollars will likely build more momentum for the cryptoasset," Simon Peters, cryptoasset analyst at eToro commented to Forbes.
Musk’s impact on Bitcoin goes even deeper than the retail space. “Tesla is using only internal & open source software & operates Bitcoin nodes directly,” he tweeted. For companies that are considering accepting BTC as payment for goods or services, by creating an internal mechanism to process the digital payments, he’s providing a model for other companies to follow.
The moves by Musk to embrace crypto have been viewed with a critical eye by some.
"Elon has tons of money and he’s very sophisticated, so I don’t worry that his bitcoin will sort of randomly go up or down," Billionaire Bill Gates told Bloomberg in an interview. "I do think people get bought into these manias who may not have as much money to spare. My general thought would be that if you have less money than Elon, you should probably watch out."
Tell that to the more than 880,000 people who liked Musk's announcement on Twitter.
Others point to the massive amount of energy it takes to mine crypto as counter-intuitive to the electric car message.
But whether or not you think Musk is driving up the price of Bitcoin for his benefit, the fact of the matter is, he has helped drive crypto out of the shadows and onto the radar of the man on the street as well as Wall Street.
“Following Tesla’s investment in bitcoin, companies including Mastercard Inc, and Bank of New York Mellon Corp have embraced the emerging asset, sparking predictions that bitcoin and other cryptocurrencies will become a regular part of investment portfolios,” Reuters reported.
“This is a seminal moment for Tesla and for the crypto world with Musk now cutting the red ribbon on Bitcoin transactions within the broader Tesla ecosystem,” Daniel Ives, analyst at Wedbush told CNBC. “We expect less than 5% of transactions to be through bitcoin over the next 12 to 18 months however this could move higher over time as crypto acceptance starts to ramp over the coming years.”
Tangible for an intangible. It’s the shape of things to come.
Joyce Pavia Hanson