When the news hit Monday morning that Elon Musk's company Tesla invested $1.5 billion into Bitcoin, it sent shockwaves through the cryptocurrency space and sent the prices surging. Here are a few reasons why this isn't just big for Bitcoin, but all of crypto.
The obvious
With an injection of $1.5 billion into Bitcoin, the price has surged making other retail investors and the like have a big return on their investment and be profitable. It also sends positive signals to investors that Bitcoin is stable and secure, enough so that one of the richest and most powerful people in the world decided to put a large sum of money into it.
Cryptocurrency as a whole
The less obvious but still strong sentiment is for the rest of the space. With this capital now in flow within the crypto economy, it has sent all other coins up as well. This is because not only does Bitcoin get a vote of confidence, so did other cryptocurrencies. The sentiment wasn't just positive, it helped to solidify crypto into the mainstream making it heard all over the world to everyone who maybe hadn't heard of it yet. This will bring a lot of new awareness and growth to the space as a whole.
Others will follow suit
One of the big advantages of this news is the network effect. When Michael Saylor pushed for CEOs to put some of their cash reserves into Bitcoin, he wasn't kidding. Apparently it worked with Elon, and now the race to put reserves into cryptocurrency when there is a limited supply is on. There is only so much of crypto, so this demand will drive prices further and higher.
What company will be next to do this is unknown, but it's possible Twitter will since the CEO Jack Dorsey is already bullish on Bitcoin. Could Jeff Bezos and Amazon be next? It's certainly possible. Reuters has also mentioned this week how Apple is positioned to get into cryptocurrency as well. We know late last year PayPal started accepting it and Visa has started working on a digital currency roadmap.
Tesla may use other cryptos in the future
When the news of the Tesla SEC filing hit the wire, many over looked the simple wording that says (in bold),
In January 2021, 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. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, 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, which we may or may not liquidate upon receipt.
Clearly it says that Tesla not only bought Bitcoin, but that it will begin to accept it as a form of payment in the future. But what they also said is that they may invest in other digital assets besides just Bitcoin in the future. If Tesla has success with using Bitcoin as a form of payment, it's only natural that if they also have other cryptocurrency assets that they will accept those as payment as well.
This may open the door for other digital currencies that focus on payments, for example Bitcoin Cash has had a huge focus on being a currency over a store of value, making it's use-case for payments and global adoption over other functions. For example, Ethereum which is doing really well, is not focused on payments but on being a smart contracts platform for decentralized applications (Dapps).
Overall the future is unknown, but it's become clear that cryptocurrency is becoming mainstream and enough in the public eye that companies are betting big on it and the momentum is here to really change the tides for the rest of the market.
Very good