Bitcoin soared in value this week after electric vehicle producer Tesla announced it had purchased $1.5 billion worth of the cryptocurrency.
Monday’s announcement immediately caused the price to shoot up from around $39,400 to $44,100, a spike of 12%. It went on to reach a new all-time high of $48,297 later in the week.
Buyers stepped in at around $46,700 after BNY Mellon said it will hold, transfer and issue Bitcoin and other cryptocurrencies on behalf of its asset management clients.
Avoiding Financial ‘Serfdom’
The BNY Mellon news helped Bitcoin maintain its impressive momentum. The upturn began when Microstrategy chief executive Michael Saylor hosted a Bitcoin-themed conference called WORLD.NOW on Wednesday last week.
Microstrategy has accumulated more than 70,000 Bitcoins over the past year, valued at around $3.5 billion. Saylor shared the firm’s playbook with fellow business executives at the virtual conference last week, arguing that the US dollar has been debased by quantitative easing and urging companies to follow Microstrategy’s lead in order to avoid financial ‘serfdom’.
In one fell swoop, Tesla became the second largest publicly traded corporate holder of Bitcoin when it announced that it had invested $1.5 billion in the cryptocurrency. That holding is now worth more than $2 billion, giving Tesla a paper profit of more than $500 million.
To put it into context, the firm made its first annual net profit in 2020 and it stood at $700 million. Tesla’s share price has already surged by more than 900% over the past year, making founder Elon Musk the world’s richest man, but it increased further on the news of the Bitcoin purchase. It now has a market cap of around $780 billion.
Will Another Big Tech Firm Follow Suit?
Tesla also revealed plans to start accepting Bitcoin as payment for its luxury electric vehicles in future. ‘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,’ said the Palo Alto-based firm in a securities filing.
Musk caused the price of BTC to increase significantly when he added the word ‘Bitcoin’ to his Twitter profile two weeks ago, and he has enjoyed talking up the benefits of the cryptocurrency on social media.
Speculation is now rife about whether another big firm will convert the cash on its balance sheet into Bitcoin. Apple has $195.6 billion in cash and marketable securities, while Alphabet has cash on hand of $136.7 billion, according to data from Bloomberg.
If a major tech firm were to take the plunge, the price of Bitcoin could rocket even further. Most altcoins surged after the Tesla news. For example, Cardano – the number four cryptocurrency by market cap – almost doubled in value over the past week. Ether has hit a new all-time high, and the likes of Bitcoin Cash, Litecoin, Polkadot, Binance Coin, Stellar and XRP have also made large gains.
The overall crypto market cap is now approaching the $1.5 trillion mark for the first time. Bitcoin accounts for more than half of that figure, with a current market cap of $886 billion.