pic: [cnbc.com]

Giselle Liu

yzl5979@psu.edu

Investing in cryptocurrency has been a trend ever since the middle of last year. Every investor wants to get some benefits from this trend, so does Tesla.

Tesla Inc., the world’s leading electric-car maker, announced that it has bought $1.5 billion worth of bitcoin last Monday. Elon Musk, the CEO of Tesla, shifted his major investments. “We expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis,” Tesla said in the securities filing. Tesla’s embrace of bitcoin makes Bitcoin (BTC) spike 14% on the news to a new all-time high above $44,000, and Tesla’s (TSLA) shares jumped 2%.

The $1.5 billion amounts to 10% of Tesla’s cash reserves and is the largest corporate purchase of bitcoin ever. RBC predicts that the next company that will purchase bitcoin will be Apple, the most valuable brand in the world. Tesla Inc. and Musk haven’t explained the reasons why holding such a great amount of bitcoin now, but business experts possessed some predictions over that.

Firstly, the cryptocurrency market brings diversity. Edward Moya, a senior market analyst from Oanda said that the Federal Reserve (FED) claims that it will keep implementing expansionary policies on cryptocurrencies due to COVID-19, which gives investors chances to be in alternative investments. Bitcoin has become the second most popular diversified investing mode.

Secondly, brand management is a crucial part of this action. It has been 12 years since bitcoin was born, and it came with the tags like “cutting-edge”, “unconventional”, and “young”, which is highly suitable as the brand image of Tesla. Tesla will attract more young bitcoin investors through holding bitcoin, and Tesla fans will also be interested in pushing the market of bitcoin.

Most importantly, from Stanley Druckenmiller, an American investor, hedge fund manager, and philanthropist, Paul Tudor Jones, an American billionaire hedge fund manager, conservationist, and philanthropist, to Bill Miller, the founder of Miller Value Partners, they all turned positive toward the future development of bitcoin. More and more investment giants show their confidence in the cryptocurrency market publicly, which shows the huge potential prospect of cryptocurrencies. 

The formalization of cryptocurrencies is near at hand, the cryptocurrency market is still violated and risky. It’s unpredictable for individual investors if they are facing colossal losses or numerous profits. The bitcoin market might also become one of the biggest market bubbles historically.