The decision by Tesla, and its enigmatic CEO Elon Musk, to take a dive into Bitcoin investing has paid off in little to no time. Tesla announced it had purchased $1.5 billion in Bitcoin on February 8th. Now, two weeks on, and Tesla is up $1 billion which equates to more than its total profit from electric cars in 2020.
The profits seen from selling electric cars in 2020 came to $721 million in 2020 — a year that saw Tesla really put its name on the map, even regarding its stock price. However, the decision to go into Bitcoin still has some investors worried despite the proof of profit.
The investment in the digital currency represented a small percentage of the company’s cash, and a very small fraction of its market value. Tesla stock is down about 8% since the disclosure. The S&P 500 and Dow Jones Industrial Average are up roughly 1% over the same span.
Of course, in the crypto sphere, the news that Tesla had put money behind Bitcoin amid a storm of interest from Musk on social media, helped spur the price on to new highs of $58,000.
An analyst at Wedbush Securities, a private investment firm in the United States, has calculated that Tesla has made “roughly $1 billion” in the aftermath of its $1.5 billion Bitcoin investment. Daniel Ives estimated Tesla’s Bitcoin profits in an investor note on Saturday, CNBC reports.
Amid Bitcoin’s parabolic surge to become a $1 trillion asset, Ives said, “Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its electric vehicle cars in all of 2020.”
“While the Bitcoin investment is a sideshow 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,” he wrote.
However, Ives expects just a small part of the market to follow the trend due to regulatory uncertainty issues:
“We still expect less than 5% of public companies will head down this route until more regulatory goal posts are put in place around the crypto market, which is clearly starting to gain more mainstream adoption in 2021.”
Moving the market
Tesla and Musk are not the only ones to be making big profits off their decision to go into Bitcoin with MicroStrategy CEO Michael Saylor also adding to his stores recently too. Saylor set a real trend when he decided to invest millions in Bitcoin as a traditional enterprise powerhouse.