Tesla’s $1.5B Bitcoin purchase leaves treasury experts scratching heads

Tesla’s $1.5B Bitcoin purchase leaves treasury experts scratching heads

Treasury commentators have criticized Tesla’s $1.5 billion in bitcoin spending, echoing the old familiar rhetoric of BTC volatility.

In an interview with the Financial Times, Jerry Klein, managing director of New York investment firm Treasury Partners, said there was no reason to put corporate money into bitcoin.

Another critic quoted by the FT, Campbell Harvey of Duke University in Durham, North Carolina, called Tesla’s purchase of bitcoins unusual and risky, adding that it would not serve as insurance against market uncertainties.

Critics of Tesla’s purchase of bitcoin say the deal could put shareholders at risk, given bitcoin’s volatility. Some point to historic crashes like the 2018 bear market and the 50% dumping that occurred on Black Thursday in March 2020.

However, these arguments do not seem to take into account the established history of bitcoin prices without a pullback, where each decline does not return to the price level before the previous all-time high.

Nor does bitcoin’s parabolic rebound from its lows figure into these anti-BTC arguments. For example, the disaster of Black Thursday in 2020 was followed by a nearly eightfold increase by the end of the year.

Since August 2020, business intelligence company MicroStrategy has bought bitcoin and spent about $1.1 billion for 71,079 BTC. At the current exchange rate, the company’s bitcoin holdings are valued at nearly $3.3 billion, a 200% gain on investment.

Source: The dance of the pieces

Tesla’s $1.5B Bitcoin purchase leaves treasury experts scratching heads

Bitcoin was the best performing asset in the last decade, gaining nearly 9,000,000,0000% and far outperforming all other asset classes. At the time of writing, only bitcoin purchased above $47,000 is losing money.

Speaking to CNBC, Michael Saylor, CEO of MicroStrategy and bitcoin bull, spoke out against the volatility rhetoric by explaining that the holding company’s cash reserves have represented a steady 75% loss in shareholder value over the past decade, while BTC investments have shown a volatile rise, doubling every six months. According to Saylor:

Companies that convert their dollars to bitcoins take a non-performing asset [cash] and convert it to the more efficient asset. Bitcoin has increased in value about 230% per year over the past decade…. I’d rather have a volatile appreciation of 230% per year than a steady depreciation of 15-20% per year.

The billion-dollar stimulus packages from the major countries are also likely to put additional pressure on fiat money.

In addition to the negative reaction to Tesla’s investment in bitcoin, these critics of the company’s cash flow have also said that other companies will not be lining up to follow Tesla’s lead.

However, Tesla is only the latest of a growing number of public companies to have bitcoin on their balance sheets. As previously reported by Cointelegraph, 1,400 companies have signed up for MicroStrategy’s bitcoin buying campaign.

Apple’s bully, RBC Capital Markets, recently urged the iPhone maker to follow Tesla’s lead and buy bitcoin. RBC even urged Apple to go ahead and set up a bitcoin exchange.

The largest crypto-currency in terms of market capitalization is currently growing at nearly 60%.

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