The Implications of Purchasing a Tesla with Bitcoin (or Other Cryptocurrency)

Mar 3, 2021   

Tesla has recently made a significant investment in Bitcoin, with plans to make vehicles available to purchase with the cryptocurrency. There are several implications potential buyers and investors should consider.

We need to highlight the volatility of Bitcoin. Between the time that Tesla purchased the cryptocurrency and now the cryptocurrency surged from just over $37,000 all the way to $57,489, settling at $48,820 at the time of publication.

This is great for both Tesla, whose $1.5 billion investment in Bitcoin grew over 40% virtually overnight, and investors that held Bitcoin beforehand or bought in at the time that news broke: their single Bitcoin that could have purchased a Model 3 Standard Range Plus essentially became a Performance model.

Ultimately unpredictability isn’t such great news. Bitcoin has had numerous unprecedented drops that would have concerned investors. While the cryptocurrency seems to have stabilized, it’s entirely possible for it to lose value just as rapidly.

It sounds great in theory for a prospective Tesla buyer to purchase Bitcoin beforehand in preparation for Tesla to add cryptocurrency as a payment method. However, the volatility could be both its benefit and detriment: those on the right side of the investment can essentially purchase a better configuration at no additional cost to them. However, it is still possible to lose money. In that sense it may not be so wise to buy into Bitcoin specifically to buy a Tesla.

This also means that there is no one fixed price Tesla can set for Bitcoin as its value changes day-to-day. Essentially the automaker would have to convert Bitcoin to the cash equivalent of a buyer’s chosen configuration at the time of purchase, so in essence it’s no different than using the market value of Bitcoin to pay MSRP.

There is one stipulation we should add: Elon Musk is a fan of Dogecoin, which is a cryptocurrency that’s become viral and popularized within the past few weeks. Dogecoin is trading at $.05, and we believe it to have a lot of long-term potential. This could very well be Tesla’s next future investment, and may be the next cryptocurrency that Tesla adds as a payment method.

We should note that post isn’t meant for those who invested in Bitcoin’s early days: congratulations for paying an insubstantial amount, holding and being able to buy a Tesla with one Bitcoin. Or a Model S/X with two. Upgrade to Plaid with three.

This post is for the average everyday investor. By all means take a risk with Bitcoin, and perhaps apply the Warren Buffett investing technique of buying and holding for several years. Everyone else should stick to their national, proven currency to purchase a Tesla.

Private sellers can feel free to follow suit and accept cryptocurrency as a payment method, although they have no obligation to. (Other than potential marketing for their favorite crypto.)

Nonetheless every investment carries risk, so we recommend all investors do their due diligence prior to investing in Bitcoin, Dogecoin, or any other cryptocurrency.

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