Elon Musk’s return on Bitcoin investment is enough to help Tesla build a new factory

Bitcoin was trading above $ 60,000 on Saturday. That means Elon Musk’s $ 1.5 billion investment in the digital currency earlier this year gave Tesla huge returns. .

Specifically, the Bitcoin price rose 5% to $ 59,800 in trading on the morning of Saturday. During the day, the digital currency rose to $ 60,409. Thus, from the beginning of the year until now, the price of Bitcoin has increased by 107% and by 1,000% compared to last year.

Back at the beginning of the year, Tesla disclosed a $ 1.5 billion investment in Bitcoin in its February annual earnings report sent to the Stock Exchange. It is difficult to know exactly how much Tesla paid to buy Bitcoin at the time, but the price of the digital currency was around 33,000 USD / 1 Bitcoin.

At its current price of $ 60,000 per Bitcoin, Tesla is currently making a profit of around $ 1.2 billion on the transaction. That money is enough to help them build a new factory that produces hundreds of thousands of Tesla cars each year.

Tesla spent $ 1.3 billion in 2019 – a time when it was rushing to complete a factory in Shanghai. Of course, it’s not all the costs of building new factories, Tesla has to use the money for other purposes as well.

Therefore, it is possible to estimate that the profit from investing in Bitcoin is enough for Tesla to build another factory after nearly 2 months.

However, the Barrons does not see this as a good signal for Tesla. Companies often invest excess money in safe, short-term assets such as treasury bills. Meanwhile, Bitcoin is known to be one of the most volatile assets today and it has not become an option for most corporations to manage and invest in assets. However, Tesla did not hesitate to invest huge sums of money in Bitcoin.

As a result, Tesla’s market cap has declined since the announcement of investing in Bitcoin. Their shares fell 20%, from $ 863 per share to $ 694 per share. About $ 161 billion market capitalization has been blown away.

Of course, concerns surrounding the risk of investing in Bitcoin are only part of the reason for this decline.

Shortages of semiconductors have led most automakers to temporarily shut down some of their existing lines, and Tesla is no exception. Tesla CEO Elon Musk once admitted that their factory in Fremont, California was shut down due to a lack of parts. Musk said the factory has only been shut down for a day or two, but hasn’t made it clear if it will be back all or part of it.

Not to mention, recently Fed Chairman Jerome Powell said “bullish pressure” and “temporary inflation” could affect the US as the economy reopens after a limited year. by the effects Covid-19 has caused. The market is currently worried that interest rates will rise and that the Fed will not take the steps expected by the market or even take stronger control measures. Bond yields have increased sharply.

This has caused a large-scale correction to technology stocks, which are priced on the assumption of strong future cash flow growth. As inflation increases, the value of those future cash flows will decrease. That affected most of the tech giants.