The Weekend Edition is pulled from the daily Stansberry Digest.
Even for bitcoin, the move was unprecedented...
In just 30 minutes, the price of the world's most popular cryptocurrency spiked roughly $4,000 on Monday, February 8 – or more than 10%.
If you're a longtime reader, you may know that I believe linking any asset's price moves with a single news item is often a stretch...
But sometimes, the story is simple and direct.
And based on the timing alone – much less the news behind it – the reason for that big jump in the price of bitcoin was pretty clear. As Stansberry NewsWire analyst Nick Koziol said that week on the topic...
Tesla (TSLA) has become the latest company to add bitcoin to its balance sheet...
In filing this morning, the electric-vehicle maker said it had adjusted its investment policy to give the company more flexibility and maximize its returns. As a result, the company said it had invested $1.5 billion in bitcoin.
This news has sent bitcoin soaring this morning...
Our first reaction was, "Of course Tesla is making a move into owning and using bitcoin"...
Tesla CEO Elon Musk has done everything against the grain for a long time.
Buying $1.5 billion of an "alternative reserve asset" – as the SEC filing described bitcoin – that many folks don't understand or have yet to trust is within Musk's character... and fits his reputation as a brash CEO who many new, younger investors believe can do no wrong.
We'll get into some of the details about why buying bitcoin does make sense for investors, or business leaders like Musk. But that's just the start of this story...
Let's look at bitcoin’s price movement for a moment...
At around 8 a.m. Eastern time on February 8, bitcoin was up roughly 12% from 24 hours earlier. It soared to nearly $44,000, a new all-time high at the time.
This surge happened simply because Tesla disclosed in its annual 10-K filing with the SEC that it had bought a lot of bitcoin...
Last month.
Yes, you read that right... Tesla didn't buy $1.5 billion of bitcoin that morning and push the price up itself. No, the company bought sometime last month.
The sudden price spike happened from everyone else reacting to the news that Tesla got in on the game several weeks ago.
We could say a lot about this whole idea today. But reading between the lines on page 106 of Tesla's otherwise largely mind-numbing SEC filing, we want to start there...
We now know that Tesla and Musk are on board with the idea of the "anti-central bank" trade...
In the SEC filing, Tesla specifically says the investment in bitcoin was made to "further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity."
In a similar line of thought, Tesla also disclosed that it may make further investments in alternative reserve assets – like digital assets, physical gold, and gold exchange-traded funds ("ETFs") – as it sees fit.
In other words, Tesla is looking to make the most of the savings it holds in U.S. dollars – by owning less of them. That makes perfect sense, as the Fed's low interest rates and stimulus bills continue to devalue the dollar.
That's the "philosophical demand" part of the bitcoin story. Moreover, the "practical demand" part of this story is in play, too – the technology side. Tesla said that it plans to accept cryptocurrency payments in the future.
And even the U.S. Treasury has cleared the way for banks to use cryptocurrencies – to transfer money using the underlying blockchain technology – and not get in trouble for it.
Today, it also seems relevant to point you to the February 6 Weekend Edition...
In that essay, I said everyone who was buying bitcoin today – and similarly, gold and silver – is making the same kind of bet that George Soros and Stanley Druckenmiller made in 1992, when they "broke" the Bank of England and forced the central bank to devalue the pound. From the essay...
They're putting money in a scarce asset designed to have low inflation that was born 13 years ago out of the financial crisis with the idea of working completely outside the traditional financial system... It's the anti-central bank trade.
I also covered MicroStrategy (MSTR) CEO Michael Saylor. He doesn't have quite the following of Musk, but he still has a large one. And he has been the most outspoken corporate CEO we've heard talk about the idea of bitcoin being the world's future reserve asset...
He has grabbed attention and headlines by putting more than $1.2 billion of MicroStrategy's funds into bitcoin – much of it in just the last month – and encouraging Tesla (TSLA) CEO Elon Musk on Twitter to go all-in on cryptos, too.
Saylor says he considers bitcoin the company's "primary treasury reserve asset."
Maybe Musk isn't going "all-in on cryptos" yet, but he's making moves in that direction...
Now, he is buying bitcoin and selling dollars on behalf of Tesla. And while that is headline-grabbing on its own, the details show it might not be as big of a risk as it sounds on the surface.
The amount he's spending ($1.5 billion) is a lot of money for any person, but it's just 0.2% of Tesla's current market cap (around $750 billion).
Here's the bigger point for the crypto world today...
This might just be the start of a run of companies following in Tesla's footsteps.
Pretend Tesla and Musk don't exist for a moment...
Let's say that a fictitious Acme Enterprises has a bunch of U.S. dollars that it wants to make the most of. This company makes in-demand products... operates with a great balance sheet... and has a ton of cash on hand. It can afford to put a little into bitcoin...
It's the same deal with Smith Corporation in the next state. The company puts just a small percentage of its cash on hand into bitcoin. Then, its CEO chats with an old friend in charge of Money Incorporated about how simple it was to buy crypto and how he has enjoyed the price appreciation in the long run...
Before you know it, a few hundred of these conversations happen... CEOs and companies start buying bitcoin... and demand increases. It's not hard to see how the value of a scarce, digital asset (its code is designed so that no more than 21 million bitcoin will ever exist) could continue to grow exponentially from here.
Now, this "mass adoption" point won't happen tomorrow...
Musk is not the typical CEO. And the C-suite crowd is much closer to the skeptical or early-adopter stage of buying bitcoin than anything else. But we're willing to bet the bulls will multiply over the months and years ahead.
Even better, we don't even have to imagine this hypothetical situation. It's already happening...
Earlier this month, representatives from more than 1,000 companies attended the World 2021 Bitcoin Summit...
Saylor, the admitted bitcoin bull, hosted the event.
Of course, with at least $1 billion in bitcoin on the company's balance sheet – and with bitcoin being the company's primary treasury reserve asset since August – he has some skin in the game.
But the point is, a lot of corporate decision-makers were interested in hearing about Saylor's experience... how he landed on making a bitcoin bet... and the benefits of it for MicroStrategy so far.
Indeed, this whole "corporate buying of bitcoin" story could play out very much like the trend we've seen over the past few months of institutional investors on Wall Street first considering, then buying cryptocurrencies.
BlackRock (BLK), the world's largest asset manager with $7.81 trillion under management, is now dabbling in bitcoin futures... And PayPal (PYPL) now lets users buy and trade cryptos in a few easy steps.
Yet as much as this all may sound like bitcoin has already "gone mainstream," it's still not quite there yet...
For just one example, new U.S. Treasury Secretary Janet Yellen made it one of her first orders of business to disparage the idea of cryptos. That tells us there's a case for it to stick around and be a bigger part of our lives.
Tremendous upside is still ahead in cryptos. Recent times, including double-digit rises in bitcoin's price in a day, show us why.
Here's one more example...
After the bitcoin rally on February 8, notice that bitcoin's price took off... not Tesla's.
The company finished the day up only about 1.3%... Ho-hum. That same evening, bitcoin – which trades around the clock, like gold and other precious metals – was up roughly 13% since the early morning run-up.
The point is... Tesla buying bitcoin was taken much more positively for bitcoin than Tesla, as it should be, even though another part of the story is that the company plans to start accepting crypto payments in the future.
And if cryptos – and the underlying blockchain technology that backs them – become as widely adopted as we believe they can, this story is likely to play out in any number of companies or industries that most people are not even imagining yet.
Said another way... millions of companies, institutional investors, and others may decide in the future to find use for bitcoin. But no matter how many adopt it, only 21 million bitcoin will ever exist. So as demand surges over the long run, the price is destined to go up.
Sometimes the story is simple and direct.
But that doesn't mean it's any less important or detailed below the surface.
We can't possibly get into all of the angles today, but if you're looking for more about this exciting movement playing out, take another step and be sure to listen to what Crypto Capital editor Eric Wade has to say.
You won't find a better guide in this space than him... And right now, he's saying the window to make the biggest gains in bitcoin and other cryptocurrencies might be closing quick, as we get closer to their mass adoption point.
All the best,
Corey McLaughlin
Editor's note: Cryptos are gaining popularity as the dollar's devaluation continues. Big names are piling in now to get ahead of bitcoin's run-up... But there's still time to take advantage of the tremendous upside ahead in the space. Eric recently shared the strategy a small group of Stansberry Research subscribers used to achieve triple-digit returns. You can watch his demo by clicking here.
