By Mark DeCambre
Much has been made about the hefty sum that Tesla Inc. has invested in bitcoin, a speculative asset that has only been around since 2009.
However, early estimates from prominent technology analyst Dan Ives sees the investment by the electric-vehicle maker, headed by outspoken Chief Executive Officer Elon Musk, already minting a digital paper profit of at least $1 billion, as the price of the asset soars to records.
“Based on our calculations, we estimate that Tesla so far has made roughly $1 billion of profit over the last month…To put this in perspective, Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its [electric vehicle] cars in all of 2020,” wrote Wedbush’s prolific analyst Dan Ives, in a note published on Saturday afternoon.
Earlier this month, Tesla Inc. /zigman2/quotes/203558040/composite TSLA +0.61% became the latest and most well-known major corporation to take a stake in bitcoin, underscoring the increasing acceptability of the crypto. The Palo Alto, Calif.-based company, on Feb. 8, in a public filing said that it purchased $1.5 billion of bitcoin /zigman2/quotes/31322028/realtime BTCUSD -2.81% and that it expects to begin accepting payment in the cryptocurrency for its products in the future.
The move by Tesla to invest in bitcoin was seen as further confirmation of the legitimacy of the nascent asset that didn’t exist until about 12 years ago.
It is worth noting, however, that because of the way accounting rules work for intangible assets, Tesla cannot recognize the gains on its bitcoin investment until it sells. By contrast, Tesla will have to record losses if the value of bitcoin falls before its purchase price, even if that move isn’t associated with a sale.
On Friday, bitcoin’s price soared to a record around $54,000 and breached a total market valuation of $1 trillion , further bolstering the perception of the crypto as a legitimate asset if not a nascent one.
On Saturday, a single bitcoin extended its gain to a record at $57,492, according to CoinDesk . Bitcoin prices are up over 90% so far in 2021, according to FactSet data. By comparison, gold /zigman2/quotes/210034565/delayed GC00 +0.16% , considered a rival to bitcoin, is down by about 6% in 2021. Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.75% has gained nearly 3% thus far in the year, the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.68% has climbed about 4% and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.92% has advanced 7.7% over the same period.
Tesla’s stock, by the way, has climbed over 11% since the start of the year.
The Wedbush analyst said it isn’t clear if Tesla’s bitcoin move is a stunt, aligned with the perception of Musk as an iconoclast, but still believes that it is likely that other corporations may be compelled to follow suit and swap some of their cash for bitcoins in the future.
“We still expect less than 5% of public companies will head down this route until more regulatory goal posts are put in place around the crypto market, which is clearly starting to gain more mainstream adoption in 2021 and we believe will have a seismic impact for blockchain, payments, banks, and semis in the years to come,” Ives wrote.