Tesla’s $1,5bn Bitcoin Investment Gave It A Profit Of About $1bn: Analyst

The investment in the crypto currency bitcoin made recently by the United States based electric car maker Tesla has given the company a paper profit of about $1 billion, said  Daniel Ives, analyst at Wedbush Securities.

In a note published on Saturday, Ives estimated  that the car maker is “on a trajectory to make more from its Bitcoin investments than profits from selling its EV (electric vehicle) cars in all of 2020”.

The company led by the billionaire Elon Musk said in the Securities and Exchange Commission filing earlier this month that it had invested about $1.5 billion for purchasing bitcoin which the company said was aimed to provide it “more flexibility to further diversify and maximize returns on our cash.”

The company said that the investment in the crypto currency was made some in January this year. Tesla however did not disclose the actual time or the price of the crypto currency at which it had bought it. There is also no news on whether the car maker has sold any of the bitcoins it had purchased yet.

Throughout last year and into 2021, bitcoin has witnessed a constant rally with its price touching new highs almost on a regular basis. Just last Friday, the total market cap of the crypto currency, the largest in the world in terms of value, surpassed the $1 trillion mark for the first time in its history and is up 94 per cent so far in 2021 itself.

No details of the calculations that helped him to arrive at the concluding figure were provided by Ives. The price of bitcoin had increased from an intraday high of $34,793.45 on January 31 to an intraday high of $57,487.03 on February 20, according to CoinDesk data, that date when Ives published his note.

That is an increase in price of about 65 per cent which works out to around $975 million based on the investment of $1.5 billion Tesla had made in bitcoin. The on paper profit for tesla would be more than $1 billion when calculated on the price of bitcoin as of Monday’s intraday high of $58,332.36.

“While the Bitcoin investment is a side show for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Ives said.

Tesla CEO Elon Musk is a big time supporter and proponent of digital currencies.

He recently said bitcoin is “is simply a less dumb form of liquidity than cash.” On the other hand he also tweeted last Saturday that the current price of bitcoin and another digital currency ethereum do “seem high.”

(Adapted from CNBC.com)

Categories: Creativity, Economy & Finance, Entrepreneurship, Strategy, Sustainability, Uncategorized

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