What happened
Actions of Tesla (NASDAQ: TSLA) fell 4.8% on Wednesday after CEO Elon Musk announced that customers could now buy their electric vehicles with Bitcoin (CRYPT: BTC).
And
Tesla disclosed in February that it invested $ 1.5 billion in Bitcoin. She said at the time that she hoped to start accepting cryptocurrency as a form of payment for her vehicles “in the near future”. Today, Musk made it official.
Tesla is betting heavily on Bitcoin. Image source: Getty Images.
Notably, Tesla will keep the Bitcoin it receives from its customers, rather than converting it to fiat currency, such as the U.S. dollar. This will increase Tesla’s exposure to violent fluctuations in cryptocurrency prices, which may make some shareholders uneasy.
What now
Tesla’s initial investment reinforced Bitcoin’s legitimacy among investors and corporate management teams. Combined with Musk’s support for Bitcoin on social media sites like Twitter, Tesla’s foray into digital assets helped raise the price of cryptocurrency to record levels above $ 60,000 earlier this month. Now, Tesla’s decision to accept Bitcoin payments could lead other companies to do the same.
Still, these moves undoubtedly make Tesla’s shares a more risky investment, as shareholders must now accept the inherent risks of having a growing portion of their capital allocated to a highly volatile digital currency. Investors may demand a lower price to offset these risks, which may have contributed to the stock’s decline today.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.