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Tesla’s $1.5 billion bet on bitcoin is already paying off.
Elon Musk’s electric-car maker has booked a roughly $1 billion profit on the blockbuster cryptocurrency investment it announced two weeks ago, one Wall Street analyst estimates.
“To put this in perspective, Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its [electric vehicle] cars in all of 2020,” Wedbush Securities analyst Daniel Ives wrote in a research note on the company’s foray into crypto.
The eye-popping profits came amid an explosive bitcoin rally that sent the digital currency’s market value above $1 trillion for the first time on Friday.
Tesla has played a significant role in that growth. The price of a single bitcoin has shot up 42 percent since Feb. 7 — the day before Tesla disclosed its investment — accounting for more than half of its gains this year, according to CoinDesk data.
The world’s biggest cryptocurrency has also gotten boosts from Musk’s bullish Twitter posts, such as one late last week calling bitcoin “a less dumb form of liquidity than cash.”
Ives said he expects fewer than 5 percent of public companies will join Tesla in investing their corporate cash in bitcoin until “more regulatory goal posts” are set up around the cryptocurrency market.
But he suggested that Tesla’s decision could still be a watershed moment for corporate America’s relationship to digital coins. The Silicon Valley automaker has also said it plans to start accepting bitcoin as payment.
“While the Bitcoin investment is a side show for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Ives said in his Saturday note.
Bitcoin had already been on a roll in recent months as a growing number of institutional investors saw it as an attractive asset. But major companies such as Mastercard and BNY Mellon, the nation’s oldest bank, have recently joined Tesla in signaling support for cryptocurrency, suggesting that more widespread mainstream adoption may be on the horizon.
Bitcoin fell about 6.3 percent to $53,427.98 as of 7:16 a.m. Monday after hitting a fresh record high of $58,332.36 Sunday afternoon.
The drop came after Musk tweeted Saturday that he thought the prices of bitcoin and Ether, the second-largest cryptocurrency by market value, “seem high.”
Tesla shares were down about 2.4 percent in premarket trading Monday at $762.37 as of 7:16 a.m.