On February 8, 2021, automaker Tesla became one of the biggest companies to buy and hold the increasingly rising cryptocurrency that is Bitcoin. Tesla bought up to 1.5 billion worth of Bitcoin, and this move sent shockwaves around the entire crypto-verse, leading to the digital currency to surge nearly 14% that day.
A week later, Bitcoin surpassed the $50,000 mark for the first time on February 16, 2021, although it has now dipped to $47,074. However, industry analysts and professional investors alike have predicted that Bitcoin could rise higher and that it has the potential to reach $100,000 in 18 months or less.
As other companies are still weighing their options and decisions of whether they should buy Bitcoin, Tesla is already reaping big from their Bitcoin investment, according to Wedbush Securities Managing Director Dan Ives.
Ives estimates that the automaker has garnered about $1 billion in profits from its $1.5 billion investment in Bitcoin — at least on paper.
Talking to Yahoo Finance on Monday, Ives said:
“That’s more than all they made on EV vehicles in 2020, but that continues to be the double-edged sword. It is going to add risk to the story, and we are seeing that in terms of volatility.
“Most investors I talk to still view the goalposts relatively contained in terms of the assets, and it’s a sideshow because ultimately the overall story here is the transformational EV story. Right now it’s Tesla‘s world and everyone else is paying rent in terms of EVs.”
Ives did not explain how he got to that calculation. But according to CoinDesk data, bitcoin’s price has gone from an intraday high of $34,793.45 on January 31, 2021, to an intraday high of $57,487.03 on February 20, 2021, the day he published his note.
That is a rise of about 65%, which would put the profit on Tesla’s $1.5 billion bitcoin investment at around $975 million. Based on Monday’s intraday high of $58,332.36, that profit would be over $1 billion.
However, Ives does not see the moves in cryptocurrency as part of the overall valuation of Tesla, and that the Bitcoin investment will not be that significant until the company increases its investment to $3 or $4 billion.
“I still view Bitcoin as not being factored into the price. If that starts to be $3 to $4 billion that they invest or more, then that starts to be something more significant. But right now we think China alone is worth $100 per share,” said Ives.
He added, “We still believe although a ripple effect, less than 5% of public companies will be investing in Bitcoin over the next 12 to 18 months until at least there are more regulatory goalposts put in.”
Tesla Chief Executive Officer (CEO) Elon Musk has been sending out teasing tweets bout cryptocurrencies, specifically Bitcoin, Ethereum, and Dogecoin, causing a stir in the minds of investors across the markets.
He recently said Bitcoin is “is simply a less dumb form of liquidity than cash.”
Speaking of the markets, Tesla has seen its stock drop over 4% as of Monday, February 22, 2021. This is not to mention the fact that it hit an intraday high of $900.40 on January 25, 2021, but it is currently trading at $683.00.
Since the company’s inclusion on the benchmark S&P 500 in December 2020, Tesla’s revenue has exponentially grown, and Ives feels the company will soon join the likes of tech giants Apple Inc. and Amazon Inc. in becoming a trillion dollar company by market capitalisation.
“I think we’re just in the early innings of the EV story playing out. That’s why Tesla I still think this is $1 trillion market cap [company] over the coming months,” said Ives.