Elon Musk’s $1.5 billion bet on bitcoin has exposed Tesla to ‘immense’ risk that could wipe out its profits, analysts say
- Date: 09-Feb-2021
- Source: Business Insider
- Sector:Financial Markets
- Country:Middle East
Elon Musk’s $1.5 billion bet on bitcoin has exposed Tesla to ‘immense’ risk that could wipe out its profits, analysts say
Tesla's decision to buy up $1.5 billion of bitcoin exposes Elon Musk's electric car company to "immense" risks that could wipe out its annual profit if the cryptocurrency's price plunges, a Saxo Bank strategist warned on Tuesday.
Musk's company revealed in a regulatory filing on Monday that it had invested around $1.5 billion in bitcoin and intended to start accepting the currency as payment.
Cryptocurrency investors cheered the announcement and sent the bitcoin price soaring to a record high above $48,000 early on Tuesday. It was last up 6.26% at $46,170.
Yet many analysts were skeptical about the purchase and highlighted the extreme volatility of bitcoin.
Read More: UBS says bitcoin is a bubble and too volatile to diversify a portfolio, unlike gold - here's why the bank says it could end up 'worthless'
"CEO Elon Musk has dramatically increased the risk of Tesla," Peter Garnry, head of equity strategy at Saxo Bank, said in a note on Tuesday.
"In our view, the move by Tesla is both risky and obfuscating the valuation of the company. With the volatility in bitcoin, Tesla could easily experience a 50% loss on their $1.5 billion investment."
Garnry said such a sharp plunge would add a $750 million paper loss to Tesla's accounts,