It was disclosed this week that Tesla had invested $1.5bn in Bitcoin and that it was initiating plans to start accepting the digital currency as payment for its electric vehicles, causing its value to swell to a new high of $44,100 on Monday. This comes after Elon Musk had reportedly been promoting both Bitcoin and Dogecoin on Twitter in recent days. Many have seen this move as a big boost to Bitcoin and cryptocurrencies as whole.
This move could have been made due to tax concerns
Tesla’s audit committee approved of the investment, believing it was a way to “further diversify and maximise” returns on their cash. However, this has not come without major criticism due to its increasing volatility. Nevertheless, this move could have been made due to tax concerns, as an expensed loss if there was to be one from Bitcoin’s volatility. This could be Betting on Bitcoin: cryptocurrencies’ future classed as only an impairment loss under USA tax law which could lead to visibly favourable results in Tesla’s quarterly reports, thus leading to further potential investment.
Meanwhile, Tesla has not been the only company to invest in the digital currency and instead follows a long trend of many other investors. Many of the investors involved had gradually began to seek interest following its last peak in 2017, which reached a high of $19,783.06. In late October, PayPal had announced that it was allowing its customers to buy, hold and sell cryptocurrency, effectively democratising its use even further for retail users.
Within recent years the platforms Coinbase, Robinhood and Trading212 have become commonplace platforms to buy and sell cryptocurrencies with a simple click of a button on any handheld device.
Chamath Palihapitiya, the outspoken CEO of Silicon Valley fund Social Capital, recently stated that Bitcoin could soar to $200,000. Palihapitiya, who has been investing in the cryptocurrency since 2013, explained that bitcoin is surging because more investors are realizing that national leaders are “untrustworthy”, and that they need to add a hedge to their portfolios.
Major investors and users were not only limited to companies: certain states have already begun to consider how they could accommodate cryptocurrency usage. In December 2020, the Swedish Government started exploring the feasibility of having the country move to a cryptocurrency. It was not stated whether Bitcoin would be directly involved in this new development.
News for cryptocurrencies has not been completely positive and over the last few years has posed many concerns, particularly in regard to criminal activity. For example, according to the Financial Times, authorities in the USA during October last year charged the founders of BitMEX, a major cryptocurrency exchange, with wilfully failing to prevent money laundering and operating an unregistered trading platform. These chargeswere one of many moves in a years-long effort by the American government to crack down on the cryptocurrency market that was once largely unregulated but which has now moved more under the eyes of regulators.
Fraud has become a problem for the cryptocurrency market
Fraud has become a problem for the cryptocurrency market, according to the computer analytics group, The Tie, “87% of exchanges reported trading volume was potentially suspicious, and that 75% of exchanges had some form of suspicious activity occurring on them”.
Overall, Elon Musk’s decision to involve company finances into the cryptocurrency shows that cryptocurrencies are even more likely to stay for the long run, whether that includes Bitcoin is another matter.
The increased utility of the currency whether under boom or bust for its price level has created more difficulties for regulators and governments in cracking down on the criminal activity associated with it and looks like it will continue to be an ever-expanding challenge.
Image by antanacoins via Creative Commons