Musk surmises to convert Tesla Billions to Bitcoins
By: Harsh Agrawal
Tags: Elon Musk, Portfolio, Bitcoin, Sp500, Tesla

Tesla and Bitcoin have been a blessing in disguise in the year 2020. Both the stocks have been burgeoning, giving about 650% and 224% returns to its investors respectively.

Well just imagine if Tesla shares were traded in Bitcoins instead of dollars !! This would break the internet right?

Tesla chief executive Elon Musk has sparked speculation that his electric car company could add bitcoin to its balance sheet during a public exchange on Twitter. To understand the severity of the situation lets add some numbers and data to our knowledge.

BTC/ TSLA/ S&P 500 Price Performance

From the above graph, we can culminate that both the stock have a correlation between them and, the duo has been skyrocketing in the recent past. Both the assets have earned a fortune amount of dividends to their stockholders.

Correlation of BTC, TSLA & S&P 500

Thus, Tesla and Bitcoin exhibited a strong correlation of 0.615 over the last six months, significantly higher than both of their correlations with the S&P 500. One explanation for this high correlation may be that the investor base is similar for both assets. Advocates of Tesla and Bitcoin share a common set of values. Beyond technophiles who believe technology can solve many of society’s pressing problems, Bitcoin and Tesla holders are optimists who believe in narratives of a sustainable future powered by alternative energy and sound money. Proponents of both believe in the ethos of open-source technology. Bitcoin is an open source protocol anyone with an internet connection can access. Similarly, in 2014, Elon Musk famously released all of Tesla’s patents to the public “in the spirit of the open-source movement.”

I hope this helped you to imagine the implausible statement said by Tesla’s chief executive.

Remigrating back to the topic

On the 20th of December 2020 Elon Musk while free-associating on Twitter, tweeted some tweets on Bitcoin.

“Bitcoin is my safe word,” but then followed up by saying, “Just kidding, who needs a safe word anyway!?”

Following he posted a meme that gathered much attention of the users on Twitter.

Musk’s bitcoin meme attracted Microstrategy CEO Michael Saylor to comment a few hours later. Saylor has become an avid bitcoin proponent after making the cryptocurrency his billion-dollar company’s primary Treasury reserve asset.

The Microstrategy CEO told Musk: “If you want to do your shareholders a $100 billion favor, convert the $TSLA balance sheet from USD to BTC. Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor.” Musk responded to Saylor:

Are such large transactions even possible?

Saylor answered: “Yes. I have purchased over $1.3 billion in BTC in past months & would be happy to share my playbook with you offline — from one rocket scientist to another.” A number of others chimed in to answer Musk’s question, including Binance CEO Changpeng Zhao, who recommended his own exchange to Musk. “Probably not a good idea to do it in one transaction, but can definitely be done,” he noted.

Following the Saylor conversation, Musk tweeted: “Bitcoin is almost as bs as fiat money,” and then suggested to his followers he’s a fan of Dogecoin, a parody cryptocurrency.

The Tesla CEO’s Twitter ramblings took another turn when he began to praise Dogecoin. The dog-themed cryptocurrency has been around since 2013 but is essentially worthless beyond its novelty value since, unlike Bitcoin, it is designed to be inflationary — spitting out 10,000 new coins every few minutes. Despite the inherent silliness of Dogecoin, its price shot up 40% from $0.003 to $0.005 after Musk tweeted the following:

Well-known gold bug Peter Schiff, who is one of Bitcoins harshest critics, did not appreciate Saylor’s offer of help/advice one bit:

However, Binance Co-Founder and CEO Changpeng Zhao (aka “CZ”) feels that it is only a matter of time before Tesla buys crypto:

Coinbase CEO Brian Armstrong said on Twitter late Sunday, if any company wanted to hold cryptocurrency on its balance sheet, Coinbase could help. It seems like more and more companies are starting to hold crypto on balance the sheet, as a hedge against inflation.

Does this speculate Spacex CEO might soon buy a large amount of bitcoin, possibly through his company Tesla ?

Although in past, Musk has expressed interest in Bitcoin (and crypto in general) in podcast interviews and on Twitter, due to the huge amount of scrutiny Tesla is always under, it seems unlikely that Musk will consider following Saylor’s example in the short term even though MicroStrategy already has made a huge (unrealized) profit on its Bitcoin investments. Gold bug Peter Schiff, for example, opined: “It seems like Elon Musk was only joking about exposing Tesla shareholders to bitcoin. So I don’t need to convince the board not to turn Tesla into a double bubble.”