Elon Musk explains Tesla's $1.5B bitcoin buy
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Tesla Inc. CEO Elon Musk said the inability to receive a return on his company’s cash was behind the decision to buy $1.5 billion of bitcoin.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TSLA | TESLA INC. | 787.17 | -0.21 | -0.03% |
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“When fiat currency has negative real interest, only a fool wouldn’t look elsewhere,” Musk tweeted on Thursday evening.
Real interest rates are negative when the rate of inflation exceeds the nominal interest rate.
During the height of the pandemic, the Federal Reserve cut interest rates to near-zero last year in an effort to combat the economic slowdown caused by COVID-19. At the same time the central bank’s preferred inflation measures, the personal consumption expenditure index, showed prices rose 1.3% year over year in January.
TESLA BUYS $1.5B IN BITCOIN, WILL START ACCEPTING FOR CARS
Tesla earlier this month announced the purchase of $1.5 billion of bitcoin in an effort to “further diversify and maximize” the return on its cash. Tesla ended 2020 with $19.38 billion in cash and cash equivalents, as noted in an SEC filing. It also noted it may soon accept bitcoin as payment for its cars.
Tesla said it may invest more of its cash in digital assets, gold bullion, gold exchange-traded funds and other assets.
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The Fed has said interest rates will remain low through at least the end of 2023.
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Musk’s decision to add bitcoin to Tesla’s balance sheet followed an exchange he had with MicroStrategy CEO Michael Saylor, who in December announced his company had accumulated $1.3 billion worth of the cryptocurrency.
MicroStrategy this week announced plans to raise $900 million through a convertible debt sale, saying it would use the proceeds to buy more bitcoin.
“Bitcoin is almost as bs as fiat money,” Musk said. “The keyword is ‘almost’.”
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