The news that Tesla was buying up $1.5 billion in bitcoin sent people into a frenzy in early February. The price for the cryptocurrency skyrocketed up 22% to $48,000 in less than a day. The profits and attention sent Tesla’s own market cap up a tier, rising the company’s share price by 2% so that it surpassed Facebook to become the 5th most profitable company in the world.
Meanwhile, stock market regulators are extremely concerned about the potential market volatility this could all cause. The investment is big news. Part of why people are so interested in it is because it seemed like a sudden and abrupt decision. But those in the Reddit community were warned a month ahead of time. Or at least, they were privy to someone’s guess.
The Reddit "Leak"
A person on Reddit under the username TSLAinsider posted on the platform on January 2nd allegedly predicting the purchase. The user claimed to be a software engineer for Tesla and wrote on Reddit, “You heard it here first – our Company just bought 800 Million worth of Bitcoin.” The user said Tesla bought 24,701 Bitcoin, each for approximately $33,142. “The way we did it was buying small amounts of BTC every few seconds and big amounts of BTC after a dip of at least 1.5%. We did this with a bot, which our team developed in Python and NodeJS,” the post said.
“I am not a trader I don’t know what will happen but I think this news should make our company worth more since everyone loves bitcoin these days?” The moderators of the Tesla page on Reddit, known as r/TSLA, have since deleted the post, but it remains accessible in an archived form. When it was first posted, the user was laughed at and ridiculed, along with being met with questions about the legality of disclosing the investment without permission from Tesla’s shareholders.
The Hallucinogenic Reality
After the news broke that the user seemed to be at least partially right – Tesla was, in fact, investing in Bitcoin, TSLAinsider broke another piece of news. He was on LSD when he posted that prediction. TSLAInsider talked with the New York Post about his mystifyingly accurate guess, saying, “If you want to know the truth: I am a young German guy and I was on Acid while I did this post in the last month. I had this afflatus that Elon is going to buy Bitcoin, so I created this trollpost.
And now all the newspapers around the globe are writing about it, it’s kinda funny and scary to be honest.” The user, who has been going only by his first name, Hendrik, is an active and avid Bitcoin investor. He posts about it frequently on Twitter under the same username – TSLAInsider – along with recommendations for future investments and advice based on what he plans to invest in.
Why Tesla Purchased Bitcoin
Tesla CEO Elon Musk’s explanation for the purchase is that he plans to accept bitcoin as payment for his company’s products in the future. In a public filing with the U.S. Securities and Exchange Commission, the company admitted its $1.5 billion acquisition “may be subject to volatile market prices, impairment, and unique risks of loss.” The filing says the investment is all about changing things up within the company, and speculates that company’s delving into cryptocurrency could be followed by investments in other digital assets, gold ingots, and exchange-traded funds relating to gold.
“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.” Musk has mused about cryptocurrency for a while now. In December, he tweeted about it extremely frequently, writing, “Bitcoin is my safe word,” and “Bitcoin is almost as bs as fiat money.” He also tweeted out a lude meme showing a damsel with an exposed behind covered by the word “bitcoin” who is leaning over next to a man praying upward by the slogan, “Me trying to live a normal productive life.”
Musk’s active Twitter persona and expression of interest in Bitcoin ahead of the purchase even landed him in some hot water with the SEC among lawyers who are skeptical of the “facts and circumstances” of the purchase.
The Power of a Musk Tweet
Hendrik mentioned to the New York post that he applauds Musk’s investment. He called Bitcoin the technology of the future and said that by investing in the cryptocurrency, Tesla has opened the door for other companies to follow suit. That’s another prediction of his that seems to have come true, at least to some degree: where Musk invests, others follow.
After the planet’s second-richest went on his December Twitter tirade, seeming to insult Bitcoin one moment then compliment it the next, people took it as a sign they should invest in other cryptocurrencies. Dogecoin went up 20% immediately after Musk tweeted that Bitcoin is “BS.” Recently, the business magnate has been extremely supportive of Dogecoin.
The Issues with Cryptocurrency
As Tesla’s statement to the SEC notes, there are a few problems with Bitcoin, at least in the stock market’s view. For a long time, the currency was viewed mostly as a way to buy and sell black market products, because it isn’t traced in the same way other forms of money is. It, in theory, only has value because people assign value to it; as in, it has no use outside of people saying it’s worth something. Another problem is that cryptocurrency in general is known to be catastrophic for the environment.
The terawatt-hours used by the Bitcoin network ranks among the top 30 consumers of electricity worldwide. That’s viewed as particularly wasteful, since the outcome doesn’t serve humanity in any way, the way mining ore costs a certain amount of energy but would also be useful and beneficial. Despite those concerns, Bitcoin has been consistently performing well on the markets and rising in value for some time. Elon Musk’s investment boosted its value even further, and it’s projected to rise in the coming years as people use more for regular purchases and trades. In the meantime, we’ll just have to wait to see whether TSLAInsider has any new and exciting predictions for Tesla or the Bitcoin market.