(Reuters) – Elon Musk launched a potential game-changing pair of announcements for bitcoin on Monday. Musk promised that Tesla Inc would take payment for its electric vehicles bitcoin soon, revealing it had already bought $1.5 billion worth of it.
The announcements, buried deep in Tesla’s 2020 annual report, drove a 10% surge in the world’s best-known and most held cryptocurrency and followed several social media posts by Musk that have sent the currency and other assets higher in recent weeks.
Analysts said it could help accelerate a move for bitcoin move towards the mainstream that has seen Paypal, co-founded by Musk, and a vast global money manager BlackRock move to accept the currency.
“I think we will see an acceleration of companies looking to allocate to Bitcoin now that Tesla has made the first move,” said Eric Turner, vice president of market intelligence at cryptocurrency research and data firm Messari.
“One of the largest companies in the world now owns Bitcoin, and by extension, every investor that owns Tesla (or even just an S&P 500 fund) has exposure to it as well.”
A well-known supporter of cryptocurrencies, Musk has weighed in regularly to the past month’s frenzy in retail investment, also driving up prices of the meme-based digital currency dogecoin and shares of U.S. video game chain GameStop.
He said a week ago that bitcoin was “on the verge” of being more widely accepted among investors and in December asked if it was possible to do large transactions in the currency.
In late January, Musk changed the bio of his Twitter account, which has 46 million followers, to include #bitcoin.
In a filing, Tesla said that the decision was part of its broad investment policy as a company and aimed at diversifying and maximizing its returns on cash. The report said it ended 2020 with $19.38 billion in cash and cash equivalents.
“We expect to begin accepting bitcoin as a form of payment for our products shortly, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt,” the company said.
Tesla said it had invested an aggregate of $1.5 billion in bitcoin under the changed policy and could “acquire and hold digital assets from time to time or long-term.” (bit.ly/3q53p1m)
“He’s now putting his money (shareholders’) where his mouth is,” Markets.com analyst Neil Wilson said.
“But given his recent comments – and adding #Bitcoin to his Twitter bio on January 29th – it also raises a real question about possible market manipulation.”
Central banks remain skeptical of digital currencies, but analysts say the more real-world uses appear for bitcoin, the more attractive it will prove as a long-term store of value.
Tesla is the latest corporate to add bitcoin to its treasury following similar moves by Square Inc, the payments company led by Twitter Inc chief Jack Dorsey and U.S. software firm MicroStrategy Inc.
In December, Musk had asked about the possibility of converting “large transactions” of Tesla's balance sheet into bitcoin on Twitter. Michael Saylor, Microstrategy’s CEO, had recommended to Musk to make the shift towards Bitcoin.
PayPal said in October that it would allow customers to buy, sell and hold bitcoin and other virtual coins using its online wallets. It remains to be seen whether bitcoin will see greater adoption as a form of payment, which it has traditionally struggled to achieve.
“I think a lot of institutions and corporates who thought the Saylor move was curious might see the upside in taking a small hedge on bitcoin for better returns than any other fiat yield in 2021 and follow,” said Maya Zehavi, a blockchain consultant.
“If this becomes a trend in corporate treasuries, the downside of staying on the sidelines will only become costlier over time.”
Bitcoin surged more than 10% to a record high of $43,625 after Tesla’s disclosure.
Late on Sunday, in a new endorsement for the cryptocurrency, Musk tweeted “Who let the Doge Out” — mimicking lines from the famous song by Baha Men from 2000.
ur welcome pic.twitter.com/e2KF57KLxb
— Elon Musk (@elonmusk) February 4, 2021
The coin has also received attention from California rapper Snoop Dogg by putting up an image of a dog tagged “Snoop Doge” on his Twitter timeline.
Dogecoin was mainly created as a satirical critique of the 2013 crypto frenzy and is not taken as seriously as bitcoin or ethereum. It has almost doubled in value since Friday, hitting a record $0.0871 according to data on blockchain and cryptocurrency website Coindesk.