BILLIONS FOR BITCOIN

In 2021, Bitcoin became fun again. It began the year trading at $30,000 before more than doubling in price and ultimately finishing December 60% up for the year. It was a wild, volatile ride, but a profitable one for those who acted on the buy signals – many of which were emanating from an unlikely source in the form of Elon Musk.

Musk’s outspoken Twitter persona, which saw him shoot from the hip, made him pure popcorn material that kept his millions of followers entertained and occasionally outraged. The Tesla boss was prone to oscillating between futurism, as he earnestly debated the merits of sending a crew to Mars, and shitposting, interspersed with the odd spot of trolling. His unfiltered tweets made Musk the polar opposite of most CEOs, prone to keeping their most controversial opinions to themselves.

Musk’s spicy memes and bon mots elevated him into a larger-than-life figure who could generate global headlines from a throwaway tweet. So when he began flirting with cryptocurrency in 2021, many within the community welcomed the attention it brought. Musk was familiar with Bitcoin, even if he’d yet to get his hands dirty with the stuff, famously discussing it in late 2020 in a Twitter exchange that saw Bitcoin advocate and investor Michael Saylor encourage Tesla to convert its balance sheet to BTC.

“Do your shareholders a $100 billion favor,” urged Saylor, prompting Musk to ponder, “Are such large transactions even possible?” This was classic behaviour from Saylor, who was fast earning a reputation as a Bitcoin ambassador at a time when most publicly listed companies were reluctant to touch cryptocurrency. Saylor was a rare exception – a CEO willing to not only shill Bitcoin, but to hold it on his balance sheet and eventually centre his entire business around it.

While Musk was clearly listening to Saylor, few thought he’d actually act on the advice – and certainly not as soon as he did. Yet the market certainly noticed when Musk added “#bitcoin” to his Twitter bio on Jan 29, 2021 – a move that sent Bitcoin’s price up 14% within hours and helped push the total crypto market cap above $1 trillion for the first time.

Tesla’s Big Bet on Bitcoin

In January 2021, days after Musk’s bio update, Tesla bought a total of $1.5B of Bitcoin, which it quietly acquired with the market none the wiser, the purchases spread out over the course of the month. Onchain analysts spotted major outflows from Coinbase in late January, but the source of the funds wasn’t established until February 8, when Tesla filed paperwork disclosing the $1.5B BTC purchase and its intent to accept the cryptocurrency as payment. Within hours of the news breaking, Bitcoin had surged by 15%, reaching $46,000.

The bull market was now at full speed, and Elon Musk was a major catalyst. In March, Musk announced that Tesla had begun accepting BTC for vehicle purchases in the U.S. as the cryptocurrency reached $55,000. Then, a month later, Tesla was once again talking Bitcoin, but this time it was to disclose that it had sold a portion of its BTC, realising a $101M profit in the process.

A few weeks later, Musk shocked the world by announcing that Tesla had suspended vehicle sales using Bitcoin, citing environmental concerns and sending its price plummeting by 12%. Was Musk being serious or was he simply trolling the market? When Tesla’s Q2 report was published in July, it emerged that he wasn’t fronting: the company had sold 75% of its Bitcoin holdings. It had made its money and now it was derisking. The very same month, however, Musk revealed that SpaceX, his private space company, also held Bitcoin on its balance sheet.

Tesla’s 2021 flirtation with Bitcoin was a masterclass in leveraging CEO influence for market signalling – in addition to being a bold investment that paid dividends. While the gambit proved profitable, the reputational damage from the company’s backtracking on Bitcoin payments, coupled with the distraction from its core business, means it wasn’t as clear-cut a win for Tesla as its annual accounts suggest.

But while Tesla’s own dalliance with Bitcoin was short-lived, it legitimised the acquisition of BTC as a corporate asset, adding weight to the argument that Michael Saylor had started.