Tesla Buys Bitcoin

In February 2021, Tesla announced it had purchased $1.5 billion in Bitcoin and would begin accepting it as payment for its vehicles. The announcement sent Bitcoin’s price surging.

Elon Musk had been tweeting about Bitcoin for months. His words moved markets in ways that made many in the Bitcoin community uncomfortable — a single tweet could send the price up or down significantly. The dependence of Bitcoin’s price on one person’s social media activity seemed to contradict everything Bitcoin was supposed to represent.

In May 2021, Musk announced Tesla would suspend Bitcoin payments over environmental concerns — specifically, the energy used in Bitcoin mining. Bitcoin’s price dropped around 15% in hours.

In June 2022, Tesla disclosed it had sold approximately 75% of its Bitcoin holdings, converting them to cash to support liquidity during a difficult period for the electric vehicle market.

The Tesla episode illustrated several things at once. The institutional entry of major corporations into Bitcoin moved markets dramatically. The environmental argument — already a common Bitcoin criticism — gained mainstream traction. And the volatility of Bitcoin’s price to single actors’ decisions highlighted the asset’s relative immaturity.

But it also illustrated something else: institutions were taking Bitcoin seriously enough to put significant capital to work in it. That couldn’t be unseen. Even Tesla’s partial exit didn’t change the fact that one of the world’s most prominent companies had viewed Bitcoin as a viable treasury asset.

The door Saylor opened, Tesla walked through. Then partially walked back. But the door stayed open.

Tomorrow: El Salvador — Bitcoin becomes legal tender.

— The Daily Bit