Recently, Tesla Inc. invested $1.5 billion to buy bitcoin. It has become a large entity company that speculates on bitcoin. It is also a leading brand company with strong appeal. It immediately attracted great attention from the market. Some media even asked whether musk is not doing his job properly and has begun to deviate from reality?

Bitcoin soars and falls

During the Spring Festival, bitcoin broke new records again. Since then, there have been significant fluctuations. Today, even Tesla's CEO, musk, has come to the end of "speculation", which has aroused much attention.

After bitcoin entered the financial market, it has become the largest casino in human history through the globalization of the Internet.

In other words, although bitcoin is unlikely to become a universal currency in the world, in addition to being used as a money laundering tool, bitcoin seems to be a real gambling chip.

As a matter of fact, recently, the price of bitcoin has gone up and down sharply, and the long and short positions have "exploded" many times in turn. While some people are making a lot of money, more people are losing money.

For example, recently, bitcoin dropped from the highest point of $58355 to less than $47500. In less than 24 hours, 340000 people burst their positions, and the amount of burst positions reached more than 20 billion. Many of them even have contracts as high as 1000 times. That is to say, while expecting to be rich overnight, these people often lose their wealth overnight.

Tesla buying bitcoin for speculation

Since the price of bitcoin is very easy to fluctuate sharply and keep soaring, why did musk choose to expose his company to the huge risk of bitcoin?

Tesla's statement to the SEC made it clear that investing in bitcoin is a good opportunity to diversify cash and cash equivalents. It is obvious that Tesla's purchase of bitcoin is just a speculation. One of its main purposes is to solve the problem of Tesla's cash flow as a means of hedging the company's share price.

Generally speaking, it is normal for an entity to hold large amounts of cash or cash equivalents, such as treasury bills or commercial paper, to provide operational liquidity and generate revenue.

Because Tesla's share price surged more than 700% in 2020, it has already formed a huge bubble (its P/E value is 1000 times). As a result, once the stock price falls, the cash flow will break down, and Tesla's profit from car sales in 2020 is not ideal, with only $721 million, which is not as good as the gain from the appreciation of bitcoin (more than $1 billion).

Musk's holding of soaring bitcoin will make the company's statements beautiful and give an account to shareholders and investors. Moreover, musk can back up the stock price or prevent losses caused by the decline of the stock price.

(2021-3-28)