Tesla’s bitcoin investment is starting to bear fruit amid cryptocurrency’s rise

Earlier this month, Tesla (NASDAQ:TSLA) made waves when it announced that it had invested $1.5 billion in bitcoin. The investment was practically unprecedented, with even some ardent TSLA bulls raising their eyebrows at the company’s cryptocurrency purchase. 

Yet if bitcoin’s recent rise is any indication, it appears that Tesla’s investment is already bearing fruit. Even more remarkably, the electric car maker’s profits from its $1.5 billion investment might actually be close to, or even higher, than the profits from its electric vehicle business in the fiscal year 2020. 

Tesla did not reveal the average price of the cryptocurrency that it purchased, nor did it disclose how many bitcoin it currently holds. Considering that bitcoin’s price ranged from $29,333 and $37,020 in the month when Tesla invested $1.5 billion, however, the electric car maker could have acquired between 37,020 and 51,137 bitcoin, or an average of 44,079 bitcoin.

If one were to consider bitcoin’s recent $48,450 price, and if Tesla was able to acquire 51,137 bitcoin from its $1.5 billion investment, the electric car maker would have already made a profit of $980 million. Even if Tesla bought bitcoin when the cryptocurrency was at its highest in January–resulting in the company acquiring 37,020 bitcoin–it would still result in a profit of $290 million. And if one were to assume that Tesla was able to acquire an average of 44,079 bitcoin, a profit of $640 million would be in order. 

For Tesla, 2020 was filled with milestones, with the company producing and delivering half a million vehicles in one year despite the presence of a pandemic. The electric car maker was also able to post its first profitable year in fiscal 2020 with $721 million. This was especially impressive since Tesla posted a loss of $862 million in fiscal 2019, but it is still below the company’s possible profits from its $1.5 billion purchase– at least if it was able to acquire the cryptocurrency at around $29,333 last month. 

While Tesla’s bitcoin investment is quite unusual, data from consumer analytics firm DealAid has revealed that Americans are quite optimistic about the electric car maker’s move towards cryptocurrency. As per the results of a recent study, the firm determined that 60.2% of consumers would like more companies to accept bitcoin as a payment method. The respondents who stated that they supported Tesla’s bitcoin purchase were also more than three times the number of respondents who indicated that they disliked the electric car maker’s cryptocurrency investment. 

Disclaimer: I am long TSLA.

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