News of Tesla buying $1.5 billion worth of Bitcoin dominated the financial market news today. The move came as a shock to many people, especially those in the status quo financial establishment. However, if you follow Elon Musk on Twitter, then the news is not all too surprising. Elon Musk has been tweeting about bitcoin and Dogecoin for the past couple of weeks now.
He famously tweeted on January 29, “In retrospect, it was inevitable.” People speculated that this statement was referring to Bitcoin since on that same day he put the ‘#bitcoin’ in his bio. Interesting to note is that the Bitcoin price went up 20% on the same day. Some just assumed people were buying bitcoin due to Elon Musk’s influence. However, in retrospect, it could also have been the day that Tesla made its massive $1.5 billion bitcoin purchase, which would explain its jump in price.
Why Tesla Buying Bitcoin is Genius?
This move by Tesla is pure genius. This move does to two things for Tesla:
- Marketing to Tesla Core Customer Base
- Provide Tesla With a Profitable and Very Liquid Investment.
Marketing to Tesla Core Customer Base
Elon Musk and Tesla know how to get free marketing and publicity. This move was direct signaling to Tesla’s core customer demographics. After doing some research, it became clear that Tesla and Bitcoin share the same core customer base. That is young adults (mostly males) with interest or jobs in technology.
This means that Tesla now can market directly to a core demographic that would love its products but haven’t purchased yet. Also, Tesla plans to accept bitcoin payments for its cars, which further proves that this was a genius premeditated move to target young, affluent bitcoin holders. The fact that the cheapest tesla car, the model 3, costs $37,000, which is currently less than one Bitcoin, makes the point more obvious.
If Bitcoin should increase to $100,000 in the next two years, as most experts believe, then with a third of a Bitcoin, you could afford a model 3. With half a Bitcoin, you could buy a Model Y. Just imagine what young, affluent Bitcoin holders can splurge on once Bitcoin hits $100,000.
Provide Tesla With a Profitable and Very Liquid Investment.
Bitcoin is a currency, meaning it’s very liquid. This means that you can buy and sell without converting to another form of currency or asset. The increase in companies accepting Bitcoin as payments strengthens its liquidity and value. Tesla’s decision to accept Bitcoin as payment for its cars also further gives credence to Bitcoin liquidity.
Bitcoin is a finite commodity. There is currently 21 million Bitcoin available, while the demand for it keeps going up. It’s a sure bet the value of Bitcoin will increase which will quickly increase Tesla’s $1.5 billion investment.
Tesla might have already seen a huge profit on their Bitcoin investment. Assuming Tesla bought Bitcoin on January 29 2021 then the average cost paid would be around 36,000 per Bitcoin. That means Tesla has about 41,666.667 Bitcoin. If that amount is times by the current value of Bitcoin ($45,718.17), then the value of Tesla’s investment would be at $1,904,923,750. That means Tesla increases the value of its investment by over $400 million. As stated, Tesla buying Bitcoin is genius.