Tesla could have made more profit from a single $1.5 billion bitcoin purchase than selling electric cars
Tesla Inc (NASDAQ: NASDAQ:) was sparked by announcing this month that it had purchased $1.5 billion worth of commercial bitcoin. Pushing up cryptocurrencies has also provided considerable gains for electric vehicles (EVs).
WHAT HAPPENED: Bitcoin hit the $50,000 mark for the first time on Tuesday, extending a 2021 rally that has seen the cryptocurrency’s biggest gains as adoption increases and public companies start betting on the future.
Tesla bought $1.5 billion worth of bitcoin in January, although the company has not disclosed the average purchase price of all its bitcoin holdings.
Bitcoin Gains: In January, Bitcoin was trading between $29,333 and $37,020. The $1.5 billion acquisition could net Tesla between 37,000 and 51,137 BTC. The average is 44,079 BTC.
Based on these assumptions, this is the value of Tesla Bitcoin at the current Bitcoin price of $48,450.
51,137 Bitcoins: $2.48 billion, $980 million in profit
44,079 Bitcoins: $2.14 billion, $640 million in profit
37,020 Bitcoin: $1.79 billion, $290 million in profit
Why it matters: Tesla’s purchase of bitcoin was a validation of the cryptocurrency for some, and was seen as a springboard for other public companies to make similar moves. The gains from buying Bitcoin are also worth noting, as they are likely to be higher than what Tesla will get from its entire business in fiscal 2020.
Tesla reported its first profitable year in fiscal 2020 at $721 million after posting a loss of $862 million in fiscal 2019. Tesla has only reported quarterly earnings before fiscal 2020.
Given years of net losses in its business, Tesla could make more profit from a single purchase of $1.5 billion in bitcoin than it has made from cars over the past decade.
Time will tell how much Bitcoin Tesla owns and whether the company intends to hold it for the long term or sell some for profit.
TSLA price action: Tesla shares fell 2% to $796.22 on Tuesday.