Elon Musk, a pioneer of the electric vehicle industry, just put Tesla cash where his mouth his. No, not DOGE coin people, Bitcoin! Tesla purchased $1.5B in bitcoin to add to the company’s balance sheet. Elon mentioned that Tesla is expecting vehicle purchases in the future to be possible through the means of Bitcoin, only on a limited scale to start.
The purchase of Bitcoin for the recently added S&P 500 company is a monumental move. Far from a traditional company, Tesla is still one of the largest companies in the world making the decision to purchase bitcoin. I expect that a large purchase of bitcoin from Tesla will turn heads & create a ripple effect for most of the large companies around the world. CEO’s everywhere will be asking their CFO’s, why is Tesla adding Bitcoin to their balance sheet? What is Bitcoin?
Money Printing Machine: US Government
One of the reasons might be because of the helicopter money being printed across the world due to the COVID pandemic, especially from the United States government. With another $1.9T stimulus package on the horizon, it may actually be a benefit to shareholders as a hedge against the USD since the company was sitting on $19B in cash before the purchase.
The money printing has already started to increase inflation expectations. Printing more M2 money supply has the potential to devalue the USD further and essentially make any cash in general, worth less. I expect that other large companies will announce more purchases in the coming months. To put it in perspective, between Facebook, Apple, and Google alone, the three companies have around $390B in cash and cash equivalents at the end of 2020.
If you think about just those three companies for a second, even taking 1% of their cash and putting it into a cryptocurrency like bitcoin, that’s $3.9B. More than double what Tesla has put into bitcoin as of today’s announcement. Based on Ford Motor Company’s 2020 year end, Ford had $30.8B on hand. Even Ford has more cash on hand than Tesla, who made the bold decision to purchase bitcoin.
What it means for you
Ignore the noise on CNBC talking about how Bitcoin is a scam and does not make sense, blah, blah. A majority of the media naysayers have overtime switched their opinions on bitcoin. If companies around the world begin to hold a portion of their balance sheet in bitcoin, the supply will be more consumed, which has the potential to drive bitcoin price higher. If money printing continues, you will not want to keep your hard earned cash in your bank account. That’s why if you are not into crypto already, take a stroll over to our cryptocurrency introduction guidelines to figure out how to participate in future digital currencies to diversify your portfolio.