Alternative Investments/Digital: Tesla’s Bitcoin Foray Earned It $1B

That’s an estimate from Wedbush Securities analyst Daniel Ives.

According to Daniel Ives, an analyst at Wedbush Securities, Tesla (NASDAQ: TSLA) may end up making more money from its investment in bitcoin than from the sale of its EVs cars in all of 2020. The company is already sitting on unrealized profits of approximately $1 billion from its $1.5 billion investment in bitcoin. (CNBC)

In a note published on Saturday, Ives did not provide the basis for his computation of the bitcoin profit number. It’s also possible that Tesla may have cashed in all or a part of the gains.

Tesla’s monster paper profits on bitcoin

Ives note was published on February 20, when the crypto touched an intra-day high of $57,487.03. Bitcoin’s intra-day high on January 31 was 34,793.45, according to CoinDesk data.

Based on this move alone, which represents a gain of 65%, Tesla would have made a notional gain of $975 million.

On Monday (today) bitcoin reached an intraday high of $58,332.36. At that level, Tesla’s profits would have exceeded $1 billion.

Last week, bitcoin made history when its market cap surpassed $1 trillion for the first time. The year-to-date returns on the crypto are about 72%.

It is currently traded at $52,819.45.

Lucrative sideshow for Tesla

“While the Bitcoin investment is a sideshow for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Ives wrote in his note.

Ives said the bitcoin market had started showing signs of more adoption in 2021. However, he still expected that less than 5% of listed companies would invest in cryptos unless there was more regulatory clarity.

Moreover, volatility is another concern, according to JP Morgan.

JP Morgan sounds warning note

Meanwhile, JPMorgan’s Nikolaos Panigirtzoglou wrote in a note on Friday: “Market liquidity is currently much lower for bitcoin than in gold or the S&P 500, which implies that even small flows can have a large price impact.”

As the supply of bitcoin diminishes, its market liquidity – how much is available for trades – makes it vulnerable to volatility and large price movements.

Related Story:  MicroStrategy Raises $1B; BTC Hits New High; BTC’s Market Cap Over $1T

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