The SEC annual report
The Palo Alto, California-based electric vehicle manufacturer said in a US Securities and Exchange Commission filing Monday that it made a “bet” on Bitcoin after updating its investment policy in January to allow the company to invest in digital assets, gold bullion, and gold exchange-traded funds.
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“In January 2021, we updated our investment policy to provide us with a bit more flexibility to further diversify and maximize returns on our cash reserves that are not required to maintain operating liquidity” the firm stated.
The company then stated that it invested an aggregate $1.50 billion in Bitcoin, and that it may acquire and hold various digital assets from time to time or as a long-term option.
Tesla will start accepting cryptocurrency
What started with a couple of Elon Musk’s tweets about the meme-based cryptocurrency Dogecoin (DOGE), turned into something much larger and more meaningful. The company not only invested a serious amount of money in Bitcoin, but it also stated that it will soon start to accept cryptocurrency payments.
“We expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis” – Tesla’s securities filing official statement
The leading electric-car maker’s official support of Bitcoin certainly brings even more legitimacy to cryptocurrencies, which have become more of a mainstream asset in recent years despite much skepticism coming from conservative investors.
What does this mean for Bitcoin?
Tesla’s investment in Bitcoin is not only a sign of major players entering the crypto market, but also a sign of real crypto adoption. The firm decided to invest a whopping $1.5 billion into the largest cryptocurrency, but also to start accepting crypto payments for Tesla products. In the long run, this may affect the BTC in market several ways:
- Tesla will most likely hold its BTC position for the time being, meaning that there will be even less supply of the cryptocurrency on the market, creating a supply squeeze that will send its price further up.
- The firm’s announcement that it will accept crypto payments (no matter how limited this acceptance is initially) creates another place where BTC holders can spend their favourite cryptocurrency.
- As tesla is one of the largest market players, its investment might cause a ripple effect, causing other companies to convert some of their cash reserves to BTC or other cryptocurrencies, further increasing its price while decreasing the available supply.
BTC/USD price analysis
Bitcoin’s price shot up after news of Musk’s Tesla investing in cryptocurrencies, bringing its price to a new all-time high of $44,899. The price increase was accompanied by a massive surge in volume. However, while many expected a push to $50,000 area, the move stopped right under $45,000. Major sell walls previously placed slightly above $42,000 by individuals and institutions came into play as BTC’s price rose over 10% in a matter of hours.
When it comes to its immediate price movement, BTC is trading with a very narrow range, bound by the $43,326 level to the upside and $42,980 to the downside. The largest cryptocurrency by market cap never liked stayed in such ranges for long, meaning that the next move (towards any side) will be sharp and deliberate.
If BTC bulls manage to break the current range to the upside, the cryptocurrency might push towards its recently made high, or even past $45,000. However, in the case of bears prevailing, we may see support levels of $42,000 and $40,850 retested.
A look into the future
If we, however, look at the long-term perspective of BTC, we can conclude just based on its fundamentals (institutional investment, on-chain activity, use-cases, etc.) that the cryptocurrency has a very bright future. The Ark invest report that came out on 26 January stated that if US-based institutions allocated between 2.55% and 6.55% of their cash reserves into BTC, (for either hedging against inflation or profit-seeking) the largest cryptocurrency would be worth somewhere around $500,000.
What many people don’t realise is that Bitcoin’s increase in price is not just that, but also a means of creating a stable currency that people can use in their day-to-day lives. Even fluctuations of $20,000 or $50,000 to either side would be meaningless for people that want to buy coffee with Satoshi, (the smallest unit currently recorded on the BTC blockchain) if the cryptocurrency is worth millions of dollars. And with high BTC price solving the volatility issue, all Bitcoin needs to do to become a viable currency is to handle more transactions in a quicker manner, which Lightning Network is working on.
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