Teslas Bitcoin investment could be bad for the companys climate reputation and its bottom line – TechCrunch

Tesla’s $1.5 billion investment in bitcoin may be good for elon musk, but it’s definitely risky for the company that made him the world’s richest man, according to investors, analysts and money managers at some of the world’s richest men. the largest banks in the country.

As a standard bearer for the consumer electric vehicle industry and the broader climate tech movement rallying around it, tesla’s gamble on cryptocurrency could damage its climate bona fide and reputation with the customers, even as other automakers enter the industry. eve market.

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Given bitcoin’s current environmental footprint, the deal goes against tesla’s purported interest in moving the world towards cleaner energy sources and trade.

Until the energy grid decarbonizes in places like Russia and China, bitcoin mining remains a pretty dirty business (from an energy perspective), according to some energy investors who declined to be identified because they were not authorized. to talk about musk’s plans.

“We were talking about people doing this in Russia in 2018 and harnessing coal power to run their mining operations,” said one investor. “The cost per transaction from an energy intensity standpoint has only gotten more intense. I don’t see how those things come together, the weather and cryptocurrencies.”

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The stake makes tesla one of the largest corporate holders of bitcoin, but represents a large portion of the company’s $19 billion in cash and cash equivalents on hand.

“given the size of its treasury, it feels irresponsible, in my opinion,” wrote an investor whose firm backed tesla from its earliest days. The company’s move could be seen as another example of US absurdity. capital markets in the current investment climate, and the underlying cynicism of some of its main beneficiaries.

Bitcoin investors meanwhile welcomed the move, which saw the value of their assets soar roughly 18% over the course of the day.

“The announcement that tesla has diversified its treasury by adding bitcoin is not surprising, nor is the security implied by an 8% allocation of available cash. equal to tesla’s research and development spending by 2020, this investment is significant for the company and shows a commitment to maximizing shareholder returns,” wrote stillmark founding partner alyse killeen. “Elon Musk has a long history of operating on the precipice of what is technically possible and setting the trend for what will later become operationally commonplace. I suspect the same will be true here, and that tesla is the first of a larger cohort of publicly traded companies that will try to optimize returns on their cash through bitcoin.”

industry observers on wall street also criticized the company’s big bet on bitcoin.

“tesla buys $1.5 billion in btc is interesting. I’m guessing they haven’t covered it, so they’ll either be cash rich in the future or have a hole in their balance sheet. Elon Musk is staying wild,” wrote a capital planning executive at a major Wall Street bank who declined to be identified because he was not authorized to speak to the press. “[It’s] not very different from a large company throwing cash into an extremely volatile emerging market currency.”

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Still, in the short term, the deal is bearing fruit. bitcoin’s price has risen nearly $8,000, or 18.73%, in the course of the day since tesla made its announcement.

But the investment represents the equivalent of the company’s entire R&D budget, as Killeen pointed out. that’s something. There’s also the question of whether any regulators will step in to punish Musk.

musk has been tweeting his support for bitcoin and other more arcane (or useless) cryptocurrencies like dogecoin for the past few weeks, in what appears to be a violation of his agreement with the securities and exchange commission.

The world’s richest man has previously been fined by regulatory agencies for his tweeting habits. In 2018, the SEC charged Musk with fraud for tweets about taking the electric vehicle company private at $420 a share.

“Bitcoin jumped more than 15% to a new high of $44,000 on Monday. this kind of hype-based pricing power should worry investors and consumers alike, especially if it is to be used as a medium of exchange,” wrote globaldata analyst danyaal rashid, head of thematic research at globaldata.

“if elon musk can help dictate the price of this asset with a tweet or a large order, the same could happen and drive the price back down. the task of buying a vehicle should not be speculative. consumers who may have thought of buying bitcoins to use as substitutes for fiat currency could easily end up with more or less than they bargained for.”

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