Should You Buy Your Tesla With Bitcoin?

Crypto prices pulled back this week, led by a decent-sized decline in bitcoin. From Friday-to-Friday, prices dropped about $6,000, or a little over 10%. Bitcoin’s brief foray above $60,000 didn’t last long, but it’s been comfortable in the $50,000 to $60,000 range for the past month.

Meanwhile, ether prices also dipped around 10% to last trade just above $1,600. Unlike bitcoin, ether never really challenged its February highs on the latest leg up. Prices peaked close to $2,000 in February, compared with the March high of $1,900.

Bitcoin Price

Ether Price

Now Accepting Bitcoin

One month after bolstering its balance sheet with $1.5 billion of bitcoin and announcing that it would begin accepting bitcoin as a form of payment for its products, Tesla followed through on its promise.

CEO Elon Musk tweeted on Wednesday that consumers could now buy a Tesla with bitcoin. He added that “bitcoin paid to Tesla will be retained as bitcoin, not converted to fiat currency.”

The move is certainly a vote of confidence for bitcoin from one of the largest companies in the world by market value. However, from a practical standpoint, buying a Tesla with bitcoin won’t be as seamless as many would like.

Even though, as Elon Musk says, the bitcoin transferred to Tesla for purchase of the car won’t be converted to dollars, from a tax perspective, it’s all the same. If you buy a Tesla with bitcoin, you will have to recognize capital gains on the bitcoin you send the company (assuming you have any).

As the IRS says, “If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss.”

So, if you’re sitting on big capital gains on your bitcoin, you might be better off paying for that Tesla in dollars.

See You Can Now Buy A Tesla With Bitcoin

Temporary Discount?

Grayscale’s announcement that it would buy up to $250 million worth of GBTC shares hasn’t done much to stem the trust’s plunging discount. On Wednesday, the market price for the Grayscale Bitcoin Trust fell to more than 14% below the trust’s net asset value—a record discount.

Earlier this week, Grayscale CEO Michael Sonnenshein was asked on CoinDesk TV whether he believed competition from other bitcoin products was pressuring GBTC. Here’s how he responded:

“I think the price at which any of our products are trading on the public market have always been and will continue to be driven by market forces. So, at times historically that has been at a premium to the net asset value of the vehicle, and today it is a couple of a percentage points at a discount. But ultimately, it really is a function of supply and demand, and perhaps there have been so many shares created of the fund that that has put some selling pressure on the stock itself, but ultimately, don’t perceive this being a chronic issue, but rather something that is kind of a recent dynamic change for the product itself.”

It sounds like Grayscale’s CEO thinks these big discounts are a temporary phenomenon. We’ll see if he’s right.

See Grayscale’s Sonnenshein Addresses GBTC’s Collapsing Premium

Another Bitcoin ETF Filing

Add Fidelity to the list of firms throwing their hat into the bitcoin ETF ring. The Wise Origin Bitcoin Trust, sponsored by Fidelity subsidiary FD Funds Management, filed a prospectus with the SEC on Wednesday. That makes for seven active bitcoin ETF filings in the pipeline, according to the latest count from Bloomberg.

Fun fact: Apparently, “Wise Origin” is a rough translation of Satoshi Nakamoto, the pseudonymous creator of bitcoin.

First Tweet Sells

The boom in nonfungible tokens continued this week as Jack Dorsey sold his first tweet in NFT form for $2.9 million.

Minted by the Valuables platform, a digital certificate of the tweet now lives on the blockchain. Consider it the digital version of signed memorabilia—signed in this case by Jack Dorsey.

Though there is nothing to guarantee another NFT associated with this tweet isn’t minted on another platform, right now, this is a one-of-a-kind digital item.

See Jack Dorsey’s First Ever Tweet Sells For $2.9M

What’s BitClout?

Everything is being tokenized these days. BitClout is the latest platform to ride this wave, with a focus on tokens tied to influential Twitter accounts.

Last year. that might have raised some eyebrows, but this year, that doesn’t sound any crazier than everything else going on in NFT land.

Anyway, Decrypt has a great analysis of BitClout and whether it’s legit.

“Although you can supposedly buy BitClout tokens with BTC, you can’t take your BitClout tokens out of the BitClout network. You can only send BitClout tokens to other BitClout users or use them to buy creator coins; there’s no way to redeem any of this for cash or Bitcoin.”

See BitClout Has Reaped $160M For Tokens Pegged To Celebs. Is It All A Scam?

Email Sumit Roy at [email protected] or follow him on Twitter @sumitroy2