American electric vehicle and clean energy company; Tesla announced on Monday the 8th of February 2021, that it had bought Bitcoin worth an impressive 1.5 billion dollars (164.04 billion Kenyan Shillings).
A filing with the Securities and Exchange Commission (SEC) revealed that the company; Tesla had bought the cryptocurrency; Bitcoin for “more flexibility to further diversify and maximize returns on our cash.”
Tesla also made it known that it will begin accepting payments for its various products in Bitcoin stating that it will of course be “subject to applicable laws and initially on a limited basis.”
The decision to accept Bitcoin as a form of payment will make Tesla the first major car manufacturer to implement this. The company’s 1.5 billion dollars worth of Bitcoin provides it with guaranteed liquidity in the cryptocurrency world the moment it officially begins to accept Bitcoin for payments.
The Palo Alto, California based company; Tesla’s entry into Bitcoin constitutes an investment that is a substantial percentage of its money.
According to Tesla’s recent filing, the company had more than 19 billion dollars (2.07 trillion Kenyan Shillings) in cash as well as cash equivalents.
The news has triggered questions from observers with regards to the Chief Executive Officer (CEO) of Tesla; Elon Musk’s posts on popular social media platform; Twitter. His posts on Twitter have been said to influence and increase the price of the cryptocurrencies; Bitcoin and Dogecoin as said posts or tweets included encouraging messages that spurred Twitter users and beyond, to buy said cryptocurrencies.
Sometime in January of 2021 billionaire and Chief Executive Officer (CEO) of Tesla; Elon Musk added the famous Bitcoin hashtag (#Bitcoin) to his Twitter bio.
The move by the billionaire led to the price of Bitcoin boosting briefly by as high as 20 percent.
Around 2 days later Elon Musk during a chat room session on social media platform; Clubhouse said, “I do at this point think Bitcoin is a good thing, and I am a supporter of Bitcoin.”
The price of Bitcoin has kept on reaching new All Time Highs (ATHs). On Monday the 8th of February 2021 it hit 44,200 dollars (4.84 million Kenyan Shillings). As at the time of compiling this article on the 9th of February 2021, Bitcoin’s price hit 46,993 dollars (5.15 million Kenyan Shillings).
Shares of Tesla also increased by 2 percent on Monday the 8th of February 2021 during morning hours. The company however in its Securities and Exchange Commission (SEC) filing has informed its investors of Bitcoin price’s volatility.
The Chief Executive Officer (CEO) of Tesla; Elon Musk has over the years been confronted for his posts on Twitter which tend to move markets. In 2018 for instance, he was charged with fraud by the Securities and Exchange Commission (SEC) as a result of a number of his tweets which touched on taking the company private at 420 dollars per share.
Observers are however divided about what his personal tweets showing solidarity for Bitcoin and Dogecoin would mean for the cryptocurrency world in the long term.
When settling with the Securities and Exchange Commission (SEC) Elon Musk had to step down as the chairman of his company’s board and pay a fine of 20 million dollars in addition to another fine of 20 million dollars for his company itself.
The Founder of Muddy Waters Research; Carson Block when speaking on the news of Tesla’s 1.5 billion dollars (164.04 billion Kenyan Shillings) purchase of Bitcoin, did not believe that there will be any interference by the United States government. In Carson Block’s words, “The SEC just does not have a record of success against Elon Musk so I expect any effort in that direction to go, it would just be a dead end basically.”
The Managing Director of Equity Research at Wedbush sees the benefits of the development saying, “This is Tesla and Musk diving into the deep end of the pool on crypto and it’s something that’s been rumored for a while, and ultimately now this is really them putting substance behind his view. I think it’s something the Street will have a differing view of, but ultimately … this is definitely going to be viewed as a positive for the stock.”
The Founder of Galaxy Digital; Mike Novogratz believes that the move is one that other companies will soon emulate. According to him “Every company should be looking at how to accept digital currencies, digital payments as part of their business scheme. It’s not that difficult. It’s what customers want, it’s where the world is moving. And so that I think he’s getting ahead of the curve, and I think you’re going to see every company look to figure out how they could, from McDonald’s to Bojangles, you name it.”
Allianz’s Chief Economic Advisor; Mohamed El-Erian believes that the purchase by Tesla, will boost Bitcoin. Mohamed El-Erian said, “What did Tesla tell you? Two things. One is that this will be a form of payment. And two is that this is an investment vehicle. So those are two powerful endorsements for the notion, I want to stress the notion, that bitcoins are a currency, a money, because after all money is a store of value. Money is a form of payments. So yes, that will build further momentum. As to the reaction, it’s going to be all over the place. Some will see it as visionary, others will say ‘wait a minute, if I want to invest in bitcoin, I’ll do it directly, I don’t need Tesla to do it for me.’ … So you’re going to see a whole range of reactions but for bitcoin holders, [Monday’s] good news.”
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