You’re hereis already very profitable for Elon Musk’s auto company. As the price of the cryptocurrency hit an all-time high on Sunday, the holdings of the electric vehicle maker increased by $ 1.1 billion in the last month alone. That’s more than Tesla made a profit selling cars in 2020.
Tesla revealed in a securities deposit earlier this month that it bought $ 1.5 billion worth of bitcoin. However, he did not disclose the date of the purchase, which made it impossible to know exactly how much the company made on the investment. Bitcoin was trading at just under $ 33,300 a month ago, while on Sunday the price was above $ 58,000, up 75%.
It should be noted that these gains represent “paper profits” for Tesla, with no indication that the company has sold bitcoin. Meanwhile, bitcoin’s extreme volatility means returns could be fleeting (or go even higher). As of Monday afternoon, the price of a bitcoin had fallen by more than $ 5,000 to $ 52,295, reducing Tesla’s unrealized gains on its cryptocurrency investment to less than $ 900 million.
It is always a good return. Specifically, that’s nearly 10 times the $ 95 million the automaker made each month in the second half of 2020 and more than its $ 690 million in profit for all of last year.
Tesla has indicated that he plans to keep some of his money in bitcoin for now. Last week, in response to criticism of the investment, Musk tweeted that Tesla’s purchase did not reflect his personal views on digital currency, which he called “just a less stupid form of liquidity than cash.”
It is also unclear to what extent Tesla’s bitcoin earnings will translate into better returns for the firm’s loyal shareholders. Accounting rules require companies to value their bitcoin holdings at the cost they paid for them. This means that Tesla’s bitcoin stake will likely remain valued at $ 1.5 billion on its accounting statement, regardless of the currency’s rise.
Wedbush Securities analyst Dan Ives, who rated Tesla’s Bitcoin bonanza, rated his shares as a “hold”. In a research note Monday, he called the company’s investment in bitcoin a “side show” for investors, while predicting that other large companies could follow Tesla’s lead by investing in bitcoin.
Of course, Wall Street focuses more on things like the number of vehicles Tesla sells and the pace of its expansion in China than its bitcoin holdings. On that front, Tesla’s sales trend – especially its cheaper Model 3 – is less certain this year, Ives wrote. Indeed, Tesla shares fell $ 40, or 5%, on Monday to just over $ 740.
“After a bull run for centuries, Tesla’s stock may continue to be limited,” Ives wrote in his note Monday.