Tesla investment in Bitcoin: institutions have split opinions
Elon Musk is either the hero or villain of the year after Tesla’s bitcoin purchase split the minds of institutional investors.
Not all analysts are convinced that Tesla’s recent $1.5 billion Bitcoin (BTC) purchase will be as beneficial for the Bitcoin Superstar tech giant as it has been for the BTC price.
Head of equity strategy at Saxo Bank Peter Garnry wrote in a note that Elon Musk had exposed Tesla and its investors to “immense risk”, as Reuters reported on 11 February.
“Elon Musk has exposed Tesla to immense mark-to-market risk,” Garnry said. He added that investors’ concerns would revolve around assessing Bitcoin’s value over the long term given the intense market volatility since its inception.
Former Goldman Sachs manager Gary Black also wrote on Twitter on Feb. 8 that he had closed his positions in Tesla Inc. ($TSLA), citing the company’s “riskier capital allocation” among other reasons.
Bitcoin, Ether (ETH) and many others reached new all-time highs
Bitcoin’s value rose 20 percent in the 24 hours after Tesla announced its investment, triggering a renewed surge in the cryptocurrency market. Bitcoin, Ether (ETH) and many others reached new all-time highs as a result. Meanwhile, the value of Tesla shares fell by 7.5 percent over the course of the following trading days.
Brett Winton, the head of research at ARK Invest, which allocated 8.75 per cent of its portfolio to Tesla shares, also commented. He said the investment was an “appropriate use of cash” and added: “We’re comfortable with the way we forecast the positions we put in front of our clients.”
Grayscale CEO Michael Sonnenshein recently suggested that Elon Musk’s public support of Bitcoin would spark a “race” for investment among institutional buyers and other tech “visionaries”. Sonnenshein said Grayscale, with its BTC trust, also saw stronger inflows into 2021 than in the record year of 2020.