Tesla CEO and “dogefather” Elon Musk appeared on SNL (Saturday Night Live) this weekend. As expected, his appearance led to sharp volatility in the meme cryptocurrency. However, it wasn’t the spike to $1 that many Dogecoin bulls were expecting. Instead, Dogecoin prices crashed as Musk called it a “hustle.” Meanwhile, SpaceX has started accepting Dogecoin payments. So, will Tesla also start accepting Dogecoin payments?
Musk has been among the celebrities who have backed Dogecoin. Dogecoin started as a meme currency and almost reached a market capitalization of $100 billion. However, Musk left Dogecoin bulls disappointed. A day before his SNL appearance, Musk advised caution while investing in cryptocurrencies.
Tesla accepts Bitcoin from customers
Tesla invested $1.5 billion in Bitcoins in the first quarter of 2021. Later, the company allowed users to pay for its cars using Bitcoins. Tesla’s support for Bitcoin sent its stock and Bitcoin soaring. Meanwhile, Tesla surprised markets by selling some of its Bitcoins in the first quarter. The $102 million profit that Tesla recorded on the sale of these Bitcoins helped the company post record profits in the quarter.
Why Tesla invested in Bitcoins
Tesla raised over $13 billion in 2021 through three rounds of share issuance. It doesn't need the cash immediately. Now, Tesla has negative net debt. The company thinks that Bitcoin is a good option to park its excess cash without compromising on liquidity. Also, the returns on Bitcoins could be much higher than investing in short-term debt securities like companies typically do with the cash on their balance sheet.
However, Tesla is known to do things differently. It thinks that Bitcoins are a low-risk option to invest the excess cash while earning higher yields. Not many would agree with the assumption of Bitcoin being a low-risk investment. Most people see Bitcoin as an alternative to low-risk and low-yield debt securities.
Andrew Bailey, the governor of the Bank of England, has warned that crypto investors could end up losing all of their money. The market opinion is very divided on cryptocurrencies and several old-timers, especially Warren Buffett, see them as speculative with no value.
Will Tesla invest in Dogecoin?
While announcing its purchase of Bitcoin, Tesla said in the filing that its new investment policy gives the company the flexibility to invest the surplus cash in various assets including gold and digital assets. So, there isn't any stopping Tesla from investing in Dogecoin, especially since it has much more cash on its balance sheet than it needs in the foreseeable future.
However, while the investment policy allows Tesla to invest in any digital asset including Dogecoin, would the company invest in Dogecoin? The meme coin is much more volatile than Bitcoin, which would increase Tesla’s risk profile. Also, if the cryptocurrency crashes, it could hurt Tesla’s profits.
Will Musk let Tesla buyers buy cars in Dogecoins?
Meanwhile, Musk is known to do things that many might not agree with. I wouldn't be surprised if he lets Tesla car buyers pay in Dogecoins. The move could be a big boost for the meme currency and take it to new highs.
Tesla allows car buyers to pay in Bitcoins. Also, the company said that it won’t convert these Bitcoins to dollars. Tesla is among the most prominent companies allowing buyers to pay for its products and services using Bitcoins.
Dogecoin fans tried pushing Amazon to accept Dogecoin on the platform. However, Amazon and Jeff Bezos aren't in a mood to oblige. Apart from the not-so-friendly chemistry between Musk and Bezos, which could be behind the decision, we also need to consider the massive volatility in Dogecoin which could play havoc with Amazon’s profitability, unless of course, it wants to HODL the cryptocurrency.