Tesla’s $ 1.5 billion Bitcoin investment may have already brought the automaker a profit of $ 1 billion.
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February 22, 2021 3 min read
This story originally appeared on ValueWalk
Elon Musk, Tesla CEO, said the automaker’s Bitcoin investment was “less stupid” than holding cash, and it has already paid off. One analyst estimates that Tesla has already made around $ 1 billion in profit on its Bitcoin investment due to the rising price of the cryptocurrency.
Analyst estimates that Tesla’s Bitcoin investment was worth it
In a statement released over the weekend, Wedbush analyst Daniel Ives said Tesla is expected to do more with its Bitcoin investment than it will do with selling its electric vehicles throughout 2020. He did not explain how it had calculated its $ 1 billion profit have achieved.
CNBC notes that Bitcoin price rose from an intraday high of $ 34,793.45 in late January to an intraday high of $ 57,487.03 on February 20. This equates to an increase of about 65%, which would translate into a profit of about $ 975 million for Tesla’s $ 1.5 billion bitcoin investment. The intraday high last Monday was $ 58,332.36, which would have temporarily pushed the automaker’s profit above $ 1 billion.
Earlier this month, the automaker announced in a report to the Securities and Exchange Commission that it had invested $ 1.5 billion in the cryptocurrency. Tesla said it made the purchase in January to “have more flexibility to further diversify and maximize the returns on our cash.”
It is unclear whether the automaker sold Bitcoin after the price hike. Bitcoin price has risen 94% so far this year. The cryptocurrency market capitalization topped $ 1 trillion for the first time last week.
Bitcoin price is pulling back thanks to Musk
Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies that are still managed by their founders. Tesla made its $ 1.5 billion Bitcoin investment after one of its co-founders, Musk, tweeted his change in stance on cryptocurrency. He just became a supporter of it this year.
With Bitcoin price rising after Tesla announced its purchase and after Musk tweeted in support of the cryptocurrency, it’s no surprise that the price fell after Musk tweeted again. Bloomberg notes that after the automaker’s investment last week, Bitcoin price rose 20%, topping $ 58,000 for the first time.
Over the weekend, Musk tweeted that Bitcoin prices “appear high”. In this month alone, the value of the cryptocurrency has risen by over 60%. It hit another new high on Sunday, nearing $ 59,000. Bloomberg suggests that the weekend bitcoin price volatility may be driven by people trading the cryptocurrency at home.
The news agency also suggests that institutional investors working Monday through Friday may have started selling today after Musk’s tweet. The price pulled back today and fell below $ 53,000.