PayPal Holdings Inc., which began to accept crypto in October, expects to allow the 29 million merchants on its network to do the same. Even so, merchants will be paid in traditional currencies such as the dollar rather than in cryptocurrencies when PayPal customers make purchases.
Musk’s own accountants can’t treat Tesla’s Bitcoin the same as cash. They’ll have to mark down the holding’s value if the price drops, but can’t mark it up until the gain is realized—all of which underscores the speculative nature of the move.
The world’s richest man is known for his publicity stunts and need for attention. He infamously involved himself in the rescue of a trapped Thai youth soccer team. He smoked a joint on podcaster Joe Rogan’s show. Lately, he’s been tweeting about Dogecoin, another digital token created as a joke.
Musk can say Tesla will take the coin for a car, but years of data show that most investors see it as a speculative asset, not something to have in a traditional wallet. But giving his fans the potential to use it as cash only heightens their attraction to Tesla and Bitcoin.
“Taking payments in Bitcoin is more of a sign of approval for crypto assets gaining mainstream adoption, rather than something that customers will do en masse,” said Luis Cuende, co-founder of Aragon, a platform for building and running decentralized organizations, with over $650 million in assets under management. “Tesla, as the coolest car manufacturer, keeps on improving their image and brand by positioning themselves as the edgy early adopters.”
So far, the switch from cash to Bitcoin has paid off. Hovering near $40,000 before Tesla’s filing landed Monday, Bitcoin has since rallied about 20% to a record $48,215.
“Bitcoin’s original goal was to be digital cash,” said Gil Luria, head of institutional research at D.A. Davidson & Co. “But most people that hold Bitcoin think of it as an investment.”
—With assistance from Kristine Servando.
This article was provided by Bloomberg News.