The Musk is pushing Bitcoin into the financial mainstream

Tesla bought Bitcoins for 1.5 billion dollars, and will soon accept payments in cryptocurrency.

California-based electric vehicle maker Tesla has acquired $1.5 billion worth of Bitcoins as part of the investment policy of the company headed by Elon Musk, and plans to accept digital currency payments soon to purchase the vehicle.

The company presented the new strategy in a report to the US Securities and Exchange Commission early this morning, stating that its investments in digital currencies and other “alternative reserve assets” could grow.

The value of Bitcoin jumped almost 14 percent and reached a record high level, so that at yesterday’s prices, 0.88 Bitcoin would be enough to buy the basic Tesla model 3. Tesla shares also recorded growth.

Musk turned Wall Street over last year and briefly became the richest man in the world after Tesla’s shares rose 500 percent and the company became the fifth most valuable in the United States. After his move yesterday, investors expect that a large number of other companies will decide to invest or own Bitcoins.

What is Bitcoin?

Bitcoin is the first and most popular cryptocurrency, or digital money, and it started circulating in 2009.

It was created by the mysterious “Satoshi Nakamoto” and is designed to be free from financial authorities such as governments, banks and central banks. The transfer is done peer-to-peer, which means directly between online users without intermediaries.

Bitcoin is based on blockchain technology that acts as a public registry of transactions and is provided with advanced cryptography that offers users a certain degree of anonymity.

Since there is no central authority that manages supply, the value of Bitcoin depends on users’ trust in it and so far it has been mainly used for speculation by financial traders instead of in real-world trades and payouts.

Why did the value of Bitcoin jump?

Bitcoin is moving forward, and in 2020 it jumped by 300 percent, to reach the value of 42,000 dollars in January, and over 44,000 yesterday.

Such growth is partly driven by institutional investors who see it as a safeguard against inflation in an era of major financial stimulus, caused by the pandemic, and which is attracted by the strengthening of regulations in the hitherto non-transparent crypto market.

There have always been indications that Bitcoin could be accepted as a mainstream means of payment.

PayPal Holdings announced in October that it would allow customers to buy, sell and store Bitcoins and other virtual currencies using their online wallets.

The company will also be able to use cryptocurrencies to buy from 26 million merchants on its network starting this year.

With yesterday’s announcement, Musk gave a turbo boost to that market.

How unstable is Bitcoin?

Historically, Bitcoin has been extremely unstable. That is why it is great for speculators, but less reliable as a form of payment.

For example, Bitcoin started with a value of around 13 dollars in 2013, and then jumped to 1000 by December.

During 2017, it started with around 1000 dollars and reached 20,000.

At the beginning of 2020, at one point, it fell below 4,000, only to reach a value of almost 45,000 dollars yesterday.

What does the future hold?

Cryptocurrencies, originally designed to undermine the establishment, have come a long way from those rebellious roots and are now driven by financial institutions such as hedge funds and large corporations.

Some experts in the field believe that Musk and Tesla are accelerating its inclusion in the financial mainstream.

“This will definitely change the rules of the game,” said Eric Turner, vice president of market information and cryptocurrency research at Mesari.

I think we will see more and more companies trying to opt for Bitcoin now that Tesla has made its first move.

One of the largest companies in the world now owns Bitcoin, and as a result, every investor who has shares in Tesla is also exposed.

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