Elon Musk’s $1.5 billion bet on bitcoin has exposed Tesla to ‘immense’ risk that could wipe out its profits, analysts say

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,