Bitcoin has surged to an all-time price high after Elon Musk's car firm Tesla stated that they had bought $1.5 billion worth of Bitcoin as part of an investment strategy. The company also said that it would seek to take payments in the form of Bitcoin in the future.
Bitcoin's price rose by 14% to $43,968 per coin on the back of the news of Tesla's investment.
Tesla released the news of its purchase of Bitcoin in a stock market filing in which it stated that it was updating its investment policies to involve gold-bullion and cryptocurrency. The firm added:
"Moreover, 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."
Just days before the stock filing Musk added #bitcoin to his twitter profile, leading to speculation among both the online community and investors as to Musk's involvement with the cryptocurrency. He also, in recent days, backed the cryptocurrency 'Dogecoin' which saw its price rise by more than 50%. Dogecoin was originally created as a novelty cryptocurrency and is based on an internet meme involving a dog. Others, including rapper Snoop Dogg and Kiss bassist Gene Simmons, have also tweeted in favour of Dogecoin, leading to speculative price rises. Musk went on to tweet:
"Dogecoin is the people's crypto"
Dogecoin is the people’s crypto
— Elon Musk (@elonmusk) February 4, 2021
He then went on to then tweet a video in support of Doge.
Ð is for Ðogecoin! Instructional video.https://t.co/UEEocOfcTb
— Elon Musk (@elonmusk) February 8, 2021
Speaking about Tesla's cryptocurrency investment, Eric Turner, Vice-President of market intelligence at cryptocurrency research firm Messari, said:
"I think we will see an acceleration of companies looking to allocate to Bitcoin now that Tesla has made the first move. One of the largest companies in the world now owns Bitcoin and by extension, every investor that owns Tesla, or even just an S&P 500 fund, has exposure to it as well."
While Neil Wilson, chief market analyst for Markets.com, added:
"Tesla is now starting to take on big [foreign exchange] risk - this may not worry a lot of investors, but some conservative types might be concerned."
Tesla has just bought $1.5 Billion in Bitcoin. Maybe you should as well. Check the apps in the description. ;)
Posted by Thinking Humanity on Monday, 8 February 2021
Many have pointed out that investment in cryptocurrencies can be dangerous due to the price volatility of the digital assets. Such huge price swings can lead to businesses either becoming overvalued or out-of-pocket in a very short time. There is also the danger that such high profile investments can lead to speculative bubbles in which the currency becomes overvalued and eventually collapses.
On the other hand, investors take cruptocurrencies to be a safe bet against runaway inflation with some even recognising that Bitcoin and gold are similar in that they both increase in value during economic turmoil. This is also reflected in the fact that major financial institutions such as banks and hedge-funds have started investing in crypto-currencies
Earlier this year, Musk was named as the richest person in the world, overtaking Amazon founder Jeff Bezos, after Tesla's stock price soared on the back of market optimism.
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[h/t: Bloomberg]
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