Tesla (TSLA) Bulls Weigh in on 'Head Scratching' 180 Degree Turn By Musk on Bitcoin, One Analyst Still See the Crypto Heading to $4M

May 13, 2021 8:15 AM EDT
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After announcing in February that it invested $1.5 billion in Bitcoin and would start accepting Bitcoin as a form of payment for its electric vehicles, Tesla (NASDAQ: TSLA) CEO Elon Musk shocked the crypto world Wednesday evening after making an about-face and announcing the firm would stop accepting Bitcoin, citing the use of fossil fuels in mining. Musk, however, said Tesla will not be selling its Bitcoin investment.

Tesla bull Dan Ives of Wedbush called this a "head scratching move" and highlights "Bitcoin mining has not changed in the last three months."

"Musk is now concerned about the use of fossil fuels in Bitcoin mining and transactions, yet the nature of Bitcoin mining has not changed in the last three months, which speaks to why backtracking on the crypto transaction three months later is a very surprising and confusing move to both Tesla and crypto investors," Ives commented.

Ives said the move, while not changing the thesis, adds to the noise and volatility around the stock.

"For Tesla and the stock, not accepting Bitcoin does not change the thesis or growth trajectory for the EV story, however it does add to the noise and volatility around the name at a time in which risk assets are under enormous selling pressure on the Street with Tesla leading the charge," Ives added.

Meanwhile, Trip Chowdhry of Global Equities Research highlights that as each Bitcoin is mined, the power and energy required to mine the next Bitcoin are greatly increased. And as Bitcoin price goes up, more miners join the mining process, and as more miners join, the power and energy required to mine the next Bitcoin increases exponentially. He called Bitcoin the "poster child of environment pollution."

Chowdhry said the same logic used to justify owning Bitcoin on Tesla's balance sheet, also holds if Tesla owned Wheat on its balance sheet. Owning Wheat on its balance sheet "would send a positive environmental and climate message," he said.

Despite the move by Tesla, Chowdhry still believes the cryptocurrency will head for $4 million per Bitcoin. He notes that so far only 3 of the Fortune Global 2000 companies have Bitcoin on their balance sheet and he believes the SEC is "clearly supporting" Bitcoins on the balance sheet of public companies.

The analyst also views Microstrategy (NASDAQ: MSTR) as the buyer of last resort for Bitcoin, thereby keeping the price of the cryptocurrency at high levels.

As for the Biden administration, Chowdhry said regulators may not do anything since all of the Bitcoin owners and related entities are major and safe donors to the administration.

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