Tesla has already booked a $1 billion paper profit on the surprise Bitcoin investment it disclosed just two weeks ago, a Wall Street analyst says — even as chief executive Elon Musk said over the weekend that the price of the cryptocurrency seemed “high.”
The eye-popping returns came amid an explosive bitcoin rally that Musk has helped fuel himself. The price of a single bitcoin has shot up 42 percent since Feb. 7 — the day before Tesla revealed its investment — accounting for more than half of its gains this year, according to CoinDesk data.
“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.
Nevertheless, bitcoin tumbled about 11 percent to $51,073.48 Monday morning after climbing to a fresh all-time record above $58,000 on Sunday afternoon. The retreat followed a Saturday tweet from Musk in which he opined that the prices of bitcoin and Ether, the second-largest cryptocurrency by market value, “seem high” when comparing crypto assets to gold.
Still, some Tesla watchers were quick to note that Musk last May had also tweeted that Tesla’s stock was “too high imo,” and that the company’s shares have surged more than fivefold since.
Bitcoin had already been on a roll before Tesla’s investment 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.
Musk’s Twitter posts have also helped push up bitcoin’s price. The digital currency’s market value topped $1 trillion for the first time Friday after the billionaire tech tycoon called it “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.
Tesla shares were down about 2.1 percent early trades on Monday at $764.76.
