Tesla made more profit potential from its massive Bitcoin investment than it did from selling its electric cars for all of 2020. This was stated by experts of the analytical firm Wedbush Securities in their recent publication.
And although now the cryptocurrency has dropped noticeably in price, the investment is still more profitable than one of the main activities of the company.
Recall that the purchase of bitcoins for $ 1.5 billion from Tesla became known in the first half of February. The news became almost the main event in the cryptocurrency industry, against the background of which the price of the cryptocurrency soared by almost 10 percent in a matter of hours. Since then, BTC has even managed to break through the psychologically important level of $ 50,000, overcome a trillion dollar market capitalization and set a new all-time high of $ 58,640.
Then followed the collapse of Bitcoin, which has not ended so far and has already become the largest in dollar terms. We talked about it, its scale and impact on other cryptocurrencies today in a separate article.
Tesla makes money on Bitcoin
Wedbush analysts Dan Ives and Strecker Back believe Tesla has already “made” a billion dollars in profit from its Bitcoin investment. At the same time, in the company’s reports for 2020, there is a figure of $ 721 million – Tesla’s profit for this entire period of time from the sale of its goods, that is, electric cars.
Note that analysts carried out calculations based on the Bitcoin exchange rate of 57 thousand dollars. The cryptocurrency is trading at $ 48,361 today, the equivalent of a 15.15 percent drawdown. Accordingly, potential earnings dipped from $ 1 billion to $ 848.43 million. And this is still more than the company’s income from car sales.
Overall, Tesla’s dramatic increase in profitability on BTC investment is easy to explain. First, the company invested a whopping $ 1.5 billion. Secondly, in the first days of January, Bitcoin, among other things, cost less than $ 30 thousand, that is, in fact, it practically doubled.
In honor of the large investment, the CoinMarketCap service previously placed one of Tesla’s models in first place in the ranking of digital assets by capitalization. Thus, cryptocurrency users thanked the car manufacturer for their choice. Still, after the investment of Elon Musk’s company, it will definitely not work to call Bitcoin a speculative asset, which is supposedly suitable exclusively for criminal activity. However, this still did not save the US Treasury Secretary Janet Yellen from fresh criticism.
Tesla sold 499,500 electric cars in 2020
Wedbush called the Bitcoin investment «Tesla’s secondary strategy» that «could have a ripple effect» for many other companies over the next year and a half. However, analysts predict that less than 5 percent of large players of this caliber will follow in Elon Musk ‘s footsteps «until more regulatory processes for regulation are approved in the crypto market.»
In other words, while you should not expect that the vast majority of large investors with hundreds of millions of dollars of free funds will immediately rush to add BTC to their budgets. And although Bitcoin has managed to show very good returns in the previous months, it was overtaken by a major correction. As we already reported, the rate of the main digital asset managed to collapse to $ 45,917. At the same time, the day before, BTC was worth a little less than 58 thousand.
Bitcoin price chart for two days
However, before the collapse, the cryptocurrency set an important record: its value equaled the price of a kilogram of gold . For the latter, now you need to pay approximately 57.33 thousand dollars.
Note that in the previous bull cycle, the value of Bitcoin corrected at least several times by an average of 30 percent on the way up. Well, since the moment of breaking through the line of 20 thousand dollars, we have observed only one correction of this scale. In addition, there is only one week left until March, and this month is historically considered one of the worst of the year for Bitcoin: only twice in its history, it was able to demonstrate growth over this period of time.
Bitcoin profitability by month
We believe that in this situation it is important to pay attention to two points. First of all, Bitcoin and cryptocurrencies in general are a truly volatile asset that can jump sharply in price and fall during the day. Accordingly, this may not work for conservative investors.
And although the current drop in BTC significantly dropped Tesla’s potential earnings, at the same time it was already enough to cover losses and not go into negative territory. That is, the growth of the cryptocurrency this year was so serious that even this collapse allows the company to receive hundreds of millions of dollars at the current moment, which is far from the highs. So, although such collapses can shock investors, BTC and other coins can demonstrate much more impressive growth – and in a short time. Therefore, it is definitely not worth giving up on cryptocurrencies because of the collapse.
