After Tesla bought $1.5 billion in Bitcoin and said it planned to accept the cryptocurrency as a form of payment for Tesla products, the price of Bitcoin has skyrocketed.
Tesla founder Elon Musk’s mention of the digital currency in January temporarily raised the price of Bitcoin. He’s also mentioned Dogecoin, another form of virtual money.
But the large purchase and promise that people will be able to buy a new Tesla car or battery with Bitcoin led it to reach $48,000 on Feb. 9, a record high.
“Tesla is in a unique position to accept digital currencies for payment, since the automaker does not rely on a network of independently owned dealerships to sell its vehicles unlike traditional car companies such as General Motors and Ford,” the Associated Press pointed out.
It’s unclear if other companies will follow Tesla’s lead, though a limited number of merchants also currently accept bitcoin in payment for purchases.
“Tesla is hardly considered a traditional company, but when one of the largest companies in the world starts to hold Bitcoin on its balance sheet as a substitute for cash, the market takes notice,” said Paul Hickey of Bespoke Investment Group in a client note.
But Tesla did acknowledge the unstable reputation of Bitcoin in its latest U.S. Securities and Exchange Commission filing, and not all investors are fans.
“I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value,” The Bank of England’s governor, Andrew Bailey, said in October. “It may have extrinsic value in the sense that people want it.”
Bitcoin started in January 2009 with the beginning of its blockchain. Mining Bitcoin, or introducing new bitcoins and putting them into circulation, requires miners to use a large amount of computing and electricity resources to solve highly complicated math problems as they compete to add a Bitcoin to the chain.
However, you can now trade and acquire Bitcoin whether you mine it or not. And the value of the cryptocurrency has gone up and down widely over the years as a result of speculation. This state of affairs may change if Bitcoin receives more widespread acceptance.
Have you tried your hand at investing in Bitcoin?
About the Author
Anna Weaver is a writer and multimedia journalist born, raised, and living back in her home state of Hawaii. Her two young kids keep her on her toes and hooked on online shopping. More.
