Tesla Joins the Cryptocurrency Game: What does this Mean for the Market? by@tonyfirsov

Tesla Joins the Cryptocurrency Game: What does this Mean for the Market?

image
Tony Firsov Hacker Noon profile picture

Tony Firsov

Financial and crypto journalist.

On February 8, the cryptocurrency market was rocked by the news of a $1.5 billion investment in BTC from Tesla. Bitcoin responded with an immediate rise to $48,000 and an increase in capitalization to almost $900 billion.

The new round of the Bitcoin rally is directly related to the report of Elon Musk's Tesla (NASDAQ: TSLA), and this is not surprising. Musk's Twitter has been the reason for another pump before. But what is the difference from what is happening right now?

This time, 7.5% of the company's capital at the end of 2020 was used to buy bitcoin. This is investor money. Earlier, Elon Musk could simply mention some coins on Twitter, after which his audience began to massively buy up the asset, without thinking about its advantages and disadvantages. The system worked, but it was a "hype". Tesla is now following the lead of MicroStrategy, Square, and PayPal, which turned their attention to Bitcoin in 2020.

Litecoin creator Charlie Lee said in an interview with Decrypt that this would be an example for other companies, which could accelerate the abandonment of the traditional fiat currency system:

“When merchants start accepting Bitcoin without selling it, we will start to break out of the fiat system. And have a circular economy where merchants accept crypto, pay salaries with crypto, and spend crypto for B2B".

Tesla's report also includes plans to fully implement bitcoin payments for goods and services from an electric vehicle company.

This instills confidence that such a decision from Tesla is not only speculative but also related to the company's future strategy.

“It's a turning point to have the world's wealthiest man believe in Bitcoin and put 7% of Tesla's treasury into BTC”, - Lee told Decrypt. “Tons of companies will now follow suit as they will have more confidence after seeing Elon Musk and Tesla doing it", — added the founder of Litecoin.

Due to the increased attention of institutional investors, the price of bitcoin has quadrupled in 4 months. It is worth noting that this attention is still not fading away.

Since the beginning of 2021, the number of wallets from 1000 or more BTC has increased from 1200 to 1300. The same is happening with Ethereum: the growth in the number of wallets with a volume of 10,000 ETH increased from 1150 to more than 1250, according to CoinMetrics. There are more and more whales on the market, and they are not interested in short-term speculation. 

image

Source: Twitter CoinMetrics

Tesla’s decision is a green light for many companies that were still in doubt. Of course, if this poses a threat to the traditional financial system, regulators will not hesitate to respond.

"The cryptocurrency will continue to grow on the main driver of 2020-2021 - the investment of institutional investors. And if earlier the question was “will bitcoin rise to $ 20,000 again?”, Now it looks different: “will bitcoin fall in price to 20,000 again?”,— believes Bohdan Prylepa, CTO Prof-it-Blockchain, which develops Bitcoin Ultimatum(BTCU).

Even despite the correction that will certainly follow after such growth, the
cryptocurrency market will continue to expand its influence and increase its capitalization.

Tags

Join Hacker Noon

Create your free account to unlock your custom reading experience.