Bitcoin took another large stride toward mainstream acceptance on Monday after billionaire Elon Musk’s electric vehicle company Tesla Inc revealed it had bought $1.5 billion of the cryptocurrency and would soon accept it as a form of payment for cars, sending the cryptocurrency shooting higher.
The announcements, buried deep in Tesla’s 2020 annual report, drove a roughly 20% surge in the world’s most widely held cryptocurrency to over $47,000. At current prices, 0.8 bitcoins would be enough to buy an entry-level Tesla Model 3.
Investors anticipated other companies will soon join a list of firms that invest in or hold bitcoin including BlackRock Inc, the world’s largest asset manager, and payments companies Square and PayPal.
Musk has upended Wall Street over the last year and briefly became the world’s richest person as shares of Tesla surged nearly 500% to become the fifth most-valuable U.S. company, leaving other companies and investors eager to follow in his wake.
“If any lesser mortals had made the decision to put part of their balance sheet in Bitcoin, I don’t think it would have been taken seriously,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York. “But when the richest man in the world does it, everyone has to take a second look.”
Tesla’s move to put some of its corporate reserves in bitcoin may be a signal that it expects the cryptocurrency will emerge as another store of long-term value alongside the dollar and gold, said Graham Tanaka, president and chief investment officer of Tanaka Capital Management in New York.
“Companies are very careful when it comes down to their reserves,” he said. “This doesn’t appear to be a flash in the pan. It appears to be something that may be a fundamental change.”