Bitcoin price skyrockets after Elon Musk says Tesla will accept it as payment

The price of bitcoin has rocketed after Tesla revealed it had bought nearly $2 billion worth of the volatile cryptocurrency.

Bitcoin has surged past $56,000 after Elon Musk’s bombshell move to invest $1.95 billion in the cryptocurrency.

The world’s richest man also announced his company, Tesla, would begin accepting bitcoin as payment for its cars and other products in the near future.

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In a securities filing, Tesla described the bitcoin purchase as an effort to boost company liquidity.

“In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximise returns on our cash,” Tesla said in announcing the $US1.5 billion ($A1.95 billion) bitcoin purchase.

“[As a result] we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.

The price of bitcoin has surged. Picture: Coindesk

“Tesla will also begin accepting bitcoin as a form of payment for our products in the near future,” the company added.

Following Tesla’s move, the price of bitcoin skyrocketed before dipping slightly.

Bitcoin was at $56,078.41 at 7am AEDT.

$TSLA adds $1.5 billion #Bitcoin to its balance sheet. Buckle up, we're passing the Moon and heading to Mars! 🚀

— Tyler Winklevoss (@tyler) February 8, 2021

Tesla’s move further institutionalises bitcoin as an accepted means of value in both US and global business.

It comes after bitcoin soared past $42,000 in January as investors and hedge fund managers bet on it becoming a more mainstream payment method. The digital coin has more than quadrupled in value since the start of 2020.

But sceptics say it is still highly volatile and regulators warn it is vulnerable to illicit use.

Mr Musk, an expert at disrupting corporate norms as well as economic structures, last week briefly changed his Twitter bio to simply read “#bitcoin”.

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Elon Musk has invested heavily in bitcoin. Picture: Ozan Kose/AFP

He also has taken to social media in recent days to promote dogecoin, another digital currency that was originally launched as a joke but has suddenly become more valuable.

In October, PayPal announced it would permit consumers to conduct transactions in cryptocurrency, while payments company Square said it would invest $50 million in bitcoin.

Just last month, asset management giant BlackRock announced that two of its funds could include investments in bitcoin. Still, BlackRock chief executive Larry Fink has expressed caution over bitcoin, noting it remains highly volatile.

Tesla too acknowledged in the SEC filing that digital assets “may continue to be highly volatile” and vulnerable to “malicious” technology-based attacks.

Just 12 years old, bitcoin has seen a meteoric rise since March 2020, when it stood at $US5000.

“This is probably one of the biggest developments for the cryptocurrency industry,” Fawad Razaqzada, analyst at ThinkMarkets, said of Tesla’s move.

“Tesla is going to be a major player in the auto industry and if it starts accepting bitcoin as a form of payment, it will give the digital currency further legitimacy.”

Neil Wilson, chief market analyst at Markets.com, said Tesla’s announcement was “the type of move that could take bitcoin through $US50,000 ($A65,000) owing to Mr Musk’s influence “in shaping price action and moving markets”.

But he said Mr Musk’s stance on bitcoin raises “a real question about possible market manipulation” depending on the timing of Tesla’s bitcoin purchases with his statements online.

“This may not worry a lot of investors, but some conservative types might be concerned,” Mr Wilson said. “Tesla’s move is the kind of big corporate support that bulls are latching onto.”

– with AFP