Bitcoin has drawn enthusiasts for its scarcity and security, but the volatile digital currency still is not widely used to pay for goods and services. It’s mostly been a store of value, like gold, with some limited merchants like Overstock accepting bitcoin for payment. It’s also used by those distrustful of the banking system or criminals seeking to launder money. All and all, all kinds of people use BitCoin.
Whether other major companies will follow Tesla’s lead in investing in Bitcoin or accepting it for transactions is unclear. A vehicle is a large purchase, which could make Bitcoin a better fit to pay for it.
“It was wise of Tesla to announce that it will deem its investment in Bitcoin as an ‘alternative asset.’ That is certainly appropriate, because Bitcoin might be coming into greater acceptance as currency, but it is not cash,” said Anthony Michael Sabino, a professor of law, at St. John’s University.
Tesla said last month that it had cash and cash equivalents of $19.4 billion after selling new shares to take advantage of a rising stock price. Dan Ives of Wedbush Securities said the move gives Tesla “more flexibility to further diversify and maximize returns on its cash.” Tesla is in a unique position to accept digital currencies for payment, since it does not use retail stores for there cars.
“It certainly seems that beyond embracing it as a store of value for his own trust or his own assets, it does appear that (Musk is) embracing it as a transactional tool as well,” said Michael Venuto, co-portfolio manager of the Amplify Transformational Data Sharing fund, an exchange-traded fund that tries to invest in digital currency technologies.
Venuto’s fund holds a small amount of Bitcoin but mostly invests in companies that build around such technologies.
Even with Tesla’s support, it could take some time before those who’ve made money investing in Bitcoin to use it to buy a car. Jessica Caldwell, executive director of insights at Edmunds.com, doesn’t expect it to become commonplace because most people take loans to buy their vehicles or lease them and don’t pay in cash, said Plus, most people at present would not be comfortable taking a risk with cryptocurrency on such an expensive purchase, she said.
Other experts say it’s just a matter of time before Bitcoin finds more widespread use in transactions.
“I think the trend is inexorable,” said Richard Lyons, a finance professor at the University of California at Berkeley, predicting Bitcoin and other digital currencies “will become transactional currencies increasingly over the next five years. It’s not going to happen overnight.”
Whether Tesla will get a definitive competitive advantage in accepting Bitcoin remains to be seen. The automaker could be simply investing in Bitcoin because Musk has been known to have eclectic tastes.