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Expand chart
Data: YCharts; Chart: Axios Visuals

When Elon Musk's Tesla spends $1.5 billion on bitcoin and announces that it will start accepting the cryptocurrency as payment for its cars, it's natural to ask why it would do such a thing.

Why it matters: The simplest explanation — it's just Elon being Elon — is almost certainly the correct explanation. But it also makes sense that the Tesla CEO would do such a thing.

What's happening: Musk's move is a show of strength. It displays his leadership in a new domain — cryptocurrencies — and it also cements Tesla's position as a company that can afford to invest $1.5 billion in a risky non-core venture. The company has come a long way from its near-death experience in 2018.

The big picture: Tesla is closely aligned with bitcoin in terms of market value, which makes it seem that as far as the markets are concerned, what's good for bitcoin is good for Tesla, and vice versa.

  • By making such a large bet on bitcoin, Musk becomes something of a hero to the bitcoin faithful. Those people are often affluent, tech-savvy early adopters — exactly the market that Tesla is targeting with its cars.
  • Thanks to Musk, Tesla can do things no other car company is capable of — like, for instance, becoming instantly and indelibly associated with bitcoin in the public's mind. As a marketing strategy aimed at a specific audience, that can be very effective, whether or not that target market will actually use bitcoin to pay for the cars they purchase.

Our thought bubble, from Coindesk's Zack Seward: The news of the bitcoin buy follows an escalation in crypto memery from the Tesla founder in recent weeks. Crypto was early in seeing “meme strategy” as a legitimate community engagement technique.

Between the lines: With his announcement on Monday, Musk bet on both bitcoin as a store of value and bitcoin as a payments mechanism. He said that the move into bitcoin was designed to "maximize returns on our cash," and also pledged to accept bitcoin as payment for Tesla vehicles in future.

  • Seward notes that the U.S. tax code and tepid consumer interest have stifled bitcoin payments to date, and that interest in bitcoin as an investment is much greater than interest in bitcoin as a form of payment.
  • Hope remains that bitcoin might take off in terms of payments. As a bitcoin evangelist, Musk surely feels that he should do his part to enable and encourage that.

The other side: By investing in a technology with an enormous carbon footprint, Musk risks tarnishing Tesla's environmentally responsible credentials.

  • It will be interesting to see whether and how environmentally conscious investors react to this news in coming days and weeks.

Go deeper

Tesla buys $1.5 billion in bitcoin, will start accepting the cryptocurrency as payment

Tesla CEO Elon Musk. Photo: Justin Sullivan/Getty Images

Tesla has bought $1.5 billion worth of bitcoin and will begin accepting the cryptocurrency as payment for its products, the company announced in an SEC filing Monday.

Why it matters: Tesla would be the first automaker to accept bitcoin for payments, with the $1.5 billion purchase giving the company liquidity in the cryptocurrency once it starts allowing people to use it to buy products, per CNBC.

Bryan Walsh, author of Future
Feb 8, 2021 - Energy & Environment

Elon Musk funds $100 million contest for carbon removal

Elon Musk at the Axel Springer Awards ceremony on Dec. 1, 2000. Photo: Britta Pedersen / Pool / AFP

Elon Musk is funding a $100 million innovation contest to identify effective and economical ways to remove and store carbon dioxide.

Why it matters: An innovation contest with a nine figure award could help encourage the development of new ways to approach what scientists increasingly agree is one of the most vital ways to address climate change.

Hope King, author of Closer
56 mins ago - Economy & Business

Peloton pumps its brakes

Data: FactSet; Chart: Axios Visuals

Peloton’s popularity is falling as swiftly as it shot up.

Why it matters: Not all pandemic habits stick around. Peloton's trajectory over the past two years exemplifies how challenging it's been for companies to gauge shifts in consumer demand — particularly in sectors heavily altered by the pandemic.