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Portfolio > Alternative Investments > Cryptocurrencies

Bitcoin Surges After Tesla Discloses $1.5B Purchase

By Bernice Napach

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Bitcoin sailed to another record high after Tesla purchased $1.5 billion of the cryptocurrency.

In early trading on Monday, Bitcoin surged to $44,795 before retreating to just over $43,000 in early afternoon. It was still priced about 30% higher than a week ago.

Tesla disclosed its Bitcoin purchase in a 10-K filing with the Securities and Exchange Commission, which also said Tesla expects to begin accepting Bitcoin as payment for its products “in the near future.”

Initially such payments, which Tesla “may or may not liquidate upon receipt,” would be on a limited basis, and the payments would also be subject to applicable laws, according to the SEC filing.

Tesla’s investment in Bitcoin reflects an “updated our investment policy,” which was disclosed in the filing as policy that provides the company with “more flexibility to further diversify and maximize returns” on cash holdings not required for purposes of operating liquidity. The audit committee of Tesla’s board of directors approved the new investment policy, which also allows some cash to be invested in other alternative assets such as gold bullion and gold ETFs.

Tesla’s SEC filing acknowledges the potential complications of owning digital assets, including price volatility and the threat of malicious attacks, security breaches and cyberattacks due Bitcoin’s nature as an intangible asset that lacks physical form and relies on technology for creation and decentralization. The filing also acknowledges the risk of “human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets.” 

The filing says that Tesla intends to “to take all reasonable measures to secure any digital assets,” but if such threats are realized or the controls it has implemented to secure its digital assets fail, a partial or total misappropriation or loss of digital assets could result, harming the company’s finances and operating results.

The SEC filing also notes that Bitcoin is currently subject to accounting rules as an “indefinite-lived intangible asset,” which requires owners to recognize impairment charges if its fair value drops below the firm’s carrying value for the asset and that changes in generally accepted accounting principles (GAAP) rules could affect the way Tesla accounts for the digital assets it holds.

— Related on ThinkAdvisor:

Bernice Napach

@Think_Napach

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