Does Tesla buying over £1.1bn of Bitcoin signal big business is getting on board with crypto or is it a one-off?

  • Bitcoin’s value has now soared by 364 per cent over the last year to $45,791  
  • Apple, Google and Twitter have been touted as potential future investors 
  • A major issue with cryptocurrency is its vulnerability to wild price swings

Bitcoin’s value hit another record this week after Elon Musk’s electric car company Tesla revealed its $1.5billion (£1.1billion) investment in the cryptocurrency and said customers would soon be able to buy its vehicles with it.

The virtual currency’s value has now soared by 372 per cent in the last year to over $45,000, and remains way out in front of other digital currencies.

But what does Tesla’s purchase mean for Bitcoin and the wider cryptocurrency market? Is this investment a sign of how the business world is about to change?

Why has Tesla put its money into virtual currency?

In a filing with US authorities, Tesla said it had changed its investment policy to ‘provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.’

Buying Bitcoin and promising to accept it in payment form soon is part of that strategy, as is a possible investment in other reserved assets like gold bullion.

Tesla thinks its Bitcoin holdings are ‘highly liquid,’ though it admitted that digital currency prices can become very volatile, and could hurt them should they need to be liquidated.

Simon Peters, a cryptocurrency analyst at eToro, says he thinks Tesla’s action ‘cements a long-term interest in Bitcoin’s potential,’ partly through its use as a bulwark against traditional currency devaluation.

Bitcoin Cryptocurrency (Image: MaxPixel)
Bitcoin Cryptocurrency (Image: MaxPixel)

Will other big corporate names follow Tesla in?

Digital currencies are becoming increasingly popular with businesses, both as a means of transaction and investment. 

Twitter founder Jack Dorsey has a lot of Bitcoin on the balance sheet of his mobile payment company Square, while Silvergate Bank revealed in its latest earnings report that it had about $5billion of digital currency, most of it in Bitcoin. 

Peters says: ‘Twitter has revealed it has laid the groundwork for the integration of Bitcoin into its business, strengthening the long-term prospects for the world’s largest cryptoasset.’

‘Amid all the doubts around its use in the real world, the simple fact is people want alternatives to the existing financial system. They want democratisation of money and Bitcoin and other cryptoassets represent a chance to achieve that.’

‘We would expect many more companies to follow suit by both integrating Bitcoin into payrolls, or by investing in it as part of a diversification of their balance sheets.’

Tesla’s announcement sent shares in other virtual currency investors higher, such as software giant MicroStrategy, which bought $250million of Bitcoin in August and now has over 71,000 of them on hand.

Many analysts, including Eric Turner of cryptocurrency research firm Messari, also believe Tesla’s investment will encourage more companies to follow suit.

Apple and Google are rumoured to want to get involved, while Paypal is already in the process of rolling out full Bitcoin integration for its millions of users.

Read more: This is Money

Bitcoin investors: From buying a Bentley to losing it all

Bitcoin has soared to trade at an eye-watering $48,000 (£34,820), following the news that Tesla has bought $1.5bn of the crypto-currency.

Enthusiasts will tell you it’s the future of money – but investing in the notoriously volatile virtual currency can be a rollercoaster, and it’s not without risk. The hunt for new coins, using powerful computers, is also causing a surge in energy demand – which is not so good for the environment.

Here are some of your Bitcoin adventures.

‘It paid for a holiday in Iceland’

James Saye, tech consultant

I first invested in Bitcoin in 2017 – I was nervous about putting too much in, so I went for around £500.

I cashed it in for £2,500 during one of its peaks, and had a great holiday in Iceland – the cash came in handy, Iceland is lovely but expensive.

I bought in again in 2018 when the price was lower so I’m still in but I don’t regret cashing out when I did.

Bitcoin Electronic Money (Image: MaxPixel)
Bitcoin Electronic Money (Image: MaxPixel)

‘It’s part of my pension plan’

Heather Delaney, founder of Gallium Ventures

I’ve been the silent crypto-investor. I put in £5 at the very beginning and I’ve built it slowly and steadily over time. I see it as a long-term strategy, meaning the rapid highs and lows are not ones that cause me anxiety – although ask me as I near my retirement and we shall see what I think then!

Based on how much I have invested in Bitcoin over time versus what I see today, I have a 585.41% increase in my investment.

I’ve never cashed it out – but I have converted some to other currencies as the market has fluctuated.

I know loads of people who have done exciting things with their investments but for me it’s part of my pension plan. I know I’m not typical.

‘He didn’t get a single penny back’

David Stubley, founder of 7 Elements cyber-security firm

We had a client whose Bitcoin wallet was fraudulently accessed and all the money was transferred out of it. He had intended to use it as a deposit on a house.

The man had been spooked by reports of fluctuations in the currency and decided to check his wallet. But he clicked on a fraudulent link, which led him to a phishing site, a complete clone of the real thing.

He had 84 bitcoins, and the fraudsters transferred 83 of them. At the time, in 2017, they were worth $475,000.

We tracked the payment on the blockchain [a kind of shared digital public ledger] – we could see it rolling across various wallets and finally it reached a wallet containing $15m of currency.

While the final identity of the fraudsters could not be identified, we were able to have the wallets frozen, so at least denying access to the stolen funds.

Our client was irate but philosophical. Today, that stolen Bitcoin would be worth £2.8m.

Once it’s gone, it really has gone.

Read more: BBC