On 8th February 2021, Tesla announced that it has bought $1.5 billion worth of bitcoin and will start accepting payments in bitcoin in exchange for its products. While this might seem like exciting news, it is important we ask why Tesla made this move.
One of the most obvious reasons is diversification. Despite bitcoin being volatile, tesla sees bitcoin as a chance to diversify its cash and cash equivalent holdings. Tesla wrote, “We updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity”.
Although investing in bitcoin comes with a risk because the price could slump, Tesla is willing to make this bet because it sees bitcoin and cryptocurrency as the future.