Bitcoin traded above $ 60.00 on Saturday. That means Elon Musk’s bet on crypto has paid off.
more than a billion dollars.
Bitcoin, which is continuously traded on cryptocurrency exchanges, is up 5% to about $ 59,800 in Saturday morning trading. Bitcoin traded as high as $ 60,409 on Saturday. That leaves the cryptocurrency up 107% to date and 1,000% over the past year.
Tesla (ticker: TSLA) disclosed a $ 1.5 billion investment in Bitcoin in its annual report filed in February with the Securities and Exchange Commission. It’s hard to know exactly what Tesla paid for Bitcoin, but prices back then were hovering around $ 33,000.
At $ 60,000, Tesla has made roughly $ 1.2 billion from its trading. That’s almost a new factory that could produce hundreds of thousands of Tesla vehicles a year.
Tesla spent about $ 1.3 billion on capital assets in 2019, the year it was setting up its Shanghai facility. That is only an approximation of the cost of the new plant. Tesla spends money on other assets. Different plants in different geographies cost different amounts and do different things. Also, capital spending fluctuates from year to year. Still, it shows how much Tesla has made from his crypto bet.
Companies always invest excess cash in safe, short-term securities, such as Treasury bills. Bitcoin is a currency-like asset, but it is highly volatile, unlike the options that most corporate treasury departments would use to manage their cash balances. Bitcoin may be riskier than a treasury bill, but, so far, it’s hard to argue with the results.
Tesla’s market value remains low since the Bitcoin investment was announced. The share has fallen roughly 20%, from roughly $ 863 a share to $ 694. That erases about $ 161 billion from the company’s market capitalization.
However, concerns about riskier-than-average cash management have little to do with the decline. Interest rates are a more important factor. The yield on the 10-year US Treasury note has gone from less than 1.2% to about 1.6% since the investment in Bitcoin was revealed. That 0.4% increase has affected growth stocks.
home to many high-appreciation growth companies, it is down nearly 5% in the same period. the
Dow Jones Industrial Average,
by comparison, it is up more than 4%.
Higher rates affect growth stocks more than other stocks for a couple of reasons. High-growth companies often need money to grow, and financing growth is more expensive in a higher-rate environment. High-growth companies also generate most of their cash flow in the future. Future cash flow is slightly less valuable, relatively speaking, when investors can get higher returns on their investment dollars today.
Write Al Root at [email protected]