NEW YORK (CBS SF/AP) — San Francisco Bay Area automaker Tesla announced Monday it has acquired around $1.5 billion in Bitcoin and it plans to begin accepting the digital currency as payment for vehicles soon.
The electric car maker headed by Elon Musk revealed the new strategy in a filing with the U.S. Securities and Exchange Commission early Monday, saying its investment in digital currency and other “alternative reserve assets” may grow.READ MORE: UPDATE: Forward Progress of Brush Fire Near San Jose's Coyote Creek Stopped
Bitcoin spiked 14% and appeared to briefly hit a new all-time high. Shares of Tesla moved higher as well.
In its fourth quarter earnings report last month Tesla said it had cash and cash equivalents of $19.4 billion.
Tesla reported its first annual net profit in 2020, but once again the company needed regulatory credits purchased by other automakers in order to achieve it. Without $1.58 billion in credits for the year, Tesla would have lost money.
In a year that saw its stock soar to make it the world’s most valuable automaker, Tesla earned $721 million, capped by a $270 million profit in the fourth quarter. It was the company’s sixth straight quarterly net profit after years of mostly losses.READ MORE: VIDEO: Restaurant Worker Robbed At Gunpoint In San Pablo; Suspect Arrested, Gunman Sought
Critics say Tesla’s sales and profits are puny compared with established automakers such as Toyota and General Motors, and its huge valuation is not justified by financial fundamentals.
Tesla faces challenges this year from traditional automakers, which are rolling out more electric vehicles. The automaker’s meteoric stock price rise has generated big payoffs for Musk, making him one of the world’s richest people.
It’s been a wild ride for Bitcoin since it made its Wall Street debut in December 2017. Major futures exchanges rolled out bitcoin futures, pushing it to roughly $19,300, a then-unheard of price for the currency. It evaporated quickly in 2018, and by December of that year Bitcoin was worth less than $4,000 a coin. Up until the most recent rally, which started in October, Bitcoin generally floated between $5,000 and $10,000.
While in the last two years companies have embraced the technology that underlies digital currencies like Bitcoin, a concept known as the blockchain, the actual uses for Bitcoin have not really changed since its rally three years ago. It’s still largely used by those distrustful of the banking system, criminals seeking to launder money, and for the most part, as a store of value.MORE NEWS: Sonoma County Approves Plan to Speed Up Cannabis Cultivation Permits
But the dominoes could be falling if major companies follow Tesla’s lead and begin accepting the digital currency as payment.