Elon Musk is the world's richest man. Thus, it is an interesting phenomenon to see him advocate for cryptocurrencies the way he has been doing over the past few weeks.
Earlier this week, Musk's company, Tesla Inc., announced that it would move $1.5 billion of its reserves into Bitcoin. The move will see the company become the crypto industry's latest institutional investor and notch up another win for digital assets. However, it took quite a while for things to get here.
In commemoration of Musk - and Tesla - committing fully to crypto, it is worth noting the billionaire's journey with the industry so far.
Bitcoin's Rise Tempts the Musk
Like many institutional investors, Musk was particularly drawn to cryptocurrencies because of how well they helped serve several investors over the coronavirus course. As many know, the global pandemic forced companies to shut down and economies to close. The dollar - as well as several other top reserve assets - got marked down.
Looking to hedge their wealth and possibly make returns, several top companies had invested millions into Bitcoin last year. This influx of investors caused the leading cryptocurrency to surge, leading to an all-time high and much more towards the end of last year.
After Bitcoin broke the $20,000 mark for the first time in December, Musk took to Twitter to note that he had been drawn to the asset. In characteristic fashion, Musk tweeted a meme representing emotions - one which the crypto industry took to mean possible interest in the leading digital asset.
To be fair, that wasn't the first time that Musk will comment on Bitcoin. In 2019, he said that he owned 0.25 BTC, which a friend had gifted him. As far as having any holdings was concerned, he didn't.
This time, however, things were different. Musk's meme drew significant industry attention, with many immediately urging him on. Most notable was Michel Saylor, the chief executive of Virginia-based business intelligence firm MicroStrategy. Saylor immediately asked Musk to convert Tesla's balance sheet into Bitcoin, explaining that it would do the company's shareholders a "$100 billion favor."
Saylor is definitely no stranger to cryptocurrencies. MicroStrategy was one of the most prominent companies to go into Bitcoin last year, with the company purchasing $425 million in Bitcoin before December. In the last month of the year, the company announced a $650 million capital raise, claiming that it planned to use most of the funds to buy more of the asset.
Musk asked Saylor if it would be possible to make such a significant move, and the latter replied that he could share his "playbook" with the billionaire.
Saylor and MicroStrategy have indeed been sharing their playbook with companies. Considering how much the company now has in Bitcoin and how it has managed to benefit from the decision, it recently organized a two-day conference where it taught other firms looking to make the same move.
Musk Knows Bitcoin's Value
Musk's crypto links didn't end there. Early last month, he engaged in a lively Twitter discussion with some industry experts, showing that he had built a considerable understanding of Bitcoin.
The conversation began when famous writer Ben Mezrich tweeted that he would never turn down the opportunity to get paid in Bitcoin anymore. Musk answered in the affirmative, prompting a response from a crypto-friendly Twitter user about how Bitcoin had limited gold and cash when acting as a currency.
Speaking about his views on money, Musk said: "The thing we call money is just an information system for labor allocation. What actually matters is making goods & providing services. We should look at currencies from an information theory standpoint. Whichever has least error & latency will win."
Musk's tweet showed that he had grasped one of Bitcoin's primary benefits - the ability to process payments and transactions faster than most conventional transaction methods. The past few years have seen many projects focus on latency reduction, with traditional asset transfer networks like SWIFT proving to be too slow and too expensive.
The problem is especially prominent with cross-border transfers and remittances. As Bitcoin has shown several times, it has the potential to speed up asset transfers on all fronts. While many have argued about its volatility, one area where Bitcoin has consistently beat out the competition concerning currency has been with speed.
What Does the Future Hold?
Since then, it's been one crypto push after another. Musk changed his Twitter bio to include the Bitcoin hashtag last month, prompting even more industry experts' enthusiasm. The billionaire has lent his support to dog-themed cryptocurrency DOGE as well, sharing several social media posts in support of the asset as Reddit users pumped the asset and caused its market cap to jump by billions.
The entire journey came to a successful culmination when Tesla announced that it had purchased $1.5 billion in Bitcoin. The company added that it would add support for Bitcoin payments in the future as well, leading to speculation that the leading cryptocurrency could be part of its payment channels for the upcoming Cybertruck.
Some investors have definitely asked Musk to make such a move.
Tesla's investment sent Bitcoin surging, with the leading asset hitting $47,000 for the first time. Bitcoin has pulled back since then, but the rally showed that $50,000 is indeed in reach. There is hope that other companies could follow Tesla as well, but time will tell. For now, the industry can revel in the fact that another institutional player has come in.