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Enabling the next era of cryptocurrency? What does Tesla’s move mean?

On the evening of February 8,  just a few hours after Tesla was interviewed by five Chinese ministries and commissions due to continuous quality issues, Tesla amazingly shocked the cryptocurrency industry. It announced the purchase of $1.5 billion in Bitcoin and said it will support Bitcoin payments in the future.

The world’s richest man Musk’s veiled attitude towards Bitcoin was finally released at this moment. The price of Bitcoin hit 50,000 U.S. dollars, an increase of more than 20%, and the market value is approaching one trillion U.S. dollars. Undoubtedly, Tesla’s move will further promote more mainstream companies and institutions to buy Bitcoin, and promote cryptocurrency to enter the mainstream society, becoming the trend choice of the younger generation.

But from another perspective, the audience of Tesla and Bitcoin resonated very early. This incident may have little impact on people outside the common audience. Since Tesla is a US-listed company, the regulatory influence of the US government on cryptocurrencies will continue to expand, and the relevant policies of the Treasury Department will remain the “Sword of Damocles.”

In any case, Tesla is still the first “top stream” company that firmly purchases Bitcoin with huge amounts of money. Under the background that the epidemic will cause excessive currency and inflation in the next three years, whether other leading Internet companies, traditional fund institutions and even the central bank will buy bitcoin on a large scale is worth continuing attention.

The original text of Tesla’s financial report is as follows (slightly cut):

In January 2021, we updated our investment policy to provide us with greater flexibility to further diversify and maximize cash returns. This policy has been formally approved by the Audit Committee of the Board of Directors. We may invest part of our cash in certain alternative reserve assets, including digital assets, gold, etc. Since then, according to this policy, we have invested a total of $1.5 billion in Bitcoin and may acquire and hold digital assets from time to time or for a long time. Also, we hope that shortly, following applicable laws, we will begin to accept Bitcoin as a payment method for our products.

The price of digital assets may continue to be highly volatile, including the results of various related risks and uncertainties. For example, the popularity of such assets is a relatively new trend, and long-term adoption by investors, consumers, and companies is unpredictable. Also, their lack of physical form, their creation, existence, and transaction verification, their reliance on technology, and the decentralization of power may expose their integrity to malicious attacks and threats of technology obsolescence. Finally, it is not clear to what extent securities laws or other regulations will apply to such assets in the future, and this may change in the future. If we hold digital assets and their value decreases relative to our purchase price, then our financial condition may be harmed.

Tesla’s move has the following positive implications for the cryptocurrency industry:

First, promote more institutions and listed companies to purchase cryptocurrencies such as Bitcoin. Previously, listed companies have purchased a large number of mining machines and bitcoin. According to Bitcoin Treasuries data, currently, more than 6.9 billion US dollars of bitcoin are held by listed companies, and US stock companies such as Mara have purchased more than 200,000 S19 and other latest series of mining machines. . But the significance of Tesla is naturally needless to say. It may be the first leasing company to purchase bitcoin on a large scale with “real money”. After this move, buying Bitcoin may become a trend, and more listed companies will participate.

Second, promote more institutions to adopt cryptocurrency payments. Tesla emphasized that it will promote the use of Bitcoin payments, which will expand the value of cryptocurrency payments in addition to the store of value. Third, promote cryptocurrency to be more recognized by popular culture and younger generations. Tesla and Musk represent the top of today’s mobile culture, and Musk personally stands at the top of the flow. Their true recognition of cryptocurrency will make it more popular among ordinary people.

Previously, Wu said that based on data analysis, the blockchain believed that the price of Bitcoin (the price was about 25,000 US dollars at the time) still had room for 3-4 times growth. Reference Boiling 2020: What will happen to the two crown jewels of Bitcoin and Ethereum next year

From the perspective of hidden concerns:

First, the audiences of Tesla and Bitcoin overlap. Some analysts compared Tesla’s market value since the end of 18 with the trend of Bitcoin in 2017 and found that they were surprisingly consistent. The user and investor portraits of the two do have very obvious similarities: young people and men are the main ones; most of them are geeks and technology worshipers; character rebellion, etc. Also, there is a very interesting data: the proportion of Tesla users owning their own real estate is relatively small. The habit of not buying a house is also popular in the currency circle.

Therefore, Tesla’s massive purchase of Bitcoin may be a relatively small symbol of “out of the circle” for the audience. If it is true as the Royal Bank of Canada analyst said, Apple may become the next company to buy cryptocurrency; or if Bridgewater starts to buy bitcoin on a large scale (with high probability), the value and significance of going out of the circle may be greater. This also means that Tesla’s behaviour is more inclined to be independent, and the demonstration effect is average.

Secondly, as a listed company in the United States, Tesla has been cautious about supervision from the cautious vocabulary in its financial report documents. In 2018-2019, Musk had many disputes with the SEC due to suspected securities fraud. Whether Musk’s comments on Bitcoin on social media and Tesla’s massive purchases will be deemed by regulators to be suspected of manipulating the market is currently unknown.

In the future, the core influence of US regulators and institutions on Bitcoin will become more prominent in a period of time. This will be conducive to decentralized currencies led by Bitcoin, but not conducive to centralized cryptocurrency projects, stable currencies, platform currencies, etc. At present, the attitude of the U.S. Treasury Department is still unknown. One of the signs is to see whether it will pass subsequent provisions to enhance the transparency of transaction information. Refer to the biggest “black swan” in the currency circle: Is Yellen’s new US government hostile to cryptocurrencies? And for the rebellious Musk, whether the SEC will make another ruthless move.

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