Biden White House and Blue Senate a 'Game Changer' for Tesla and EV Sector

While Tesla's $1,5 billion investment in Bitcoin has generated extensive press coverage, there's much more to the company than dabbling in cryptocurrency.

An analyst said politics and the policy that flow from growing worldwide interest in electric vehicles are likely to boost Tesla's immediate prospects.

"A Biden White House and blue Senate is a very bullish political backdrop and a potential 'game changer' for Tesla and the overall EV sector in the US, with a more green-driven agenda now certainly in the cards over the next few years," Daniel Ives, an analyst at Wedbush Securities in Los Angeles, said in a research note.

"With a green tidal wave on the horizon we believe Tesla will see strong growth in the US for 2021 and beyond,' he said, "and add to the white hot growth the company is seeing in China and Europe so far this year."

Ives set a 12-month price target for Tesla's stock, an estimate of fair value, at $950 a share. In mid-day trading Monday, the stock fetched $743.01 a share. The 52-week range is $70.10 - $900.40.

Elon Musk's investment in Bitcoin has been good for the cryptocurrency—and Tesla.

Bitcoin has soared in 2021, driven in part by wider commercial adoption of the cryptocurrency, including Tesla's announcement that it could be used to buy one of its electric cars.

"Based on our calculations, we estimate that Tesla so far has made roughly $1 billion of profit over the last month from its Bitcoin investment given the skyrocketing price of Bitcoin, which now tops a trillion of market value," Ives said.

"To put this in perspective, Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EV cars in all of 2020," he said. "While the Bitcoin investment is a sideshow for Tesla, it's clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months."

Despite Musk's successful investment in Bitcoin, Ives doesn't expect other major companies to stampede into the cryptocurrency.

"We still expect less than 5% of public companies will head down this route until more regulatory goal posts are put in place around the crypto market," he said, "which is clearly starting to gain more mainstream adoption in 2021 and we believe will have a seismic impact for blockchain, payments, banks, and (semiconductors) in the years to come."

Bitcoin changed hands at $53,134.73 in mid-day trading Monday, down about 8.91% from the all-time high of $58,332.36. Bitcoin's year-to-date return is 80.29%, CoinDesk reported.

Ethereum, the world's second-most popular cryptocurrency, fetched $1,731.10 in mid-day trading Monday, down about 14.98% from the all-time high of $2,036.55. Ethereum's year-to-date return is 139.03%, CoinDesk reported.

Tesla disclosed in a filing with the Securities and Exchange Commission that it had purchased Bitcoin valued at $1.5 billion for "more flexibility to further diversity and maximize returns on our cash." The purchase was made in January, but Tesla didn't disclose the purchase price.

"Money is just data that allows us to avoid the inconvenience of barter," Musk tweeted Saturday. "That data, like all data, is subject to latency & error. The system will evolve to that which minimizes both."

Then he added an important qualifier.

"That said, (Bitcoin and Etherium) do seem high lol," Musk tweeted.

If Musk's can spark a rally in Bitcoin, could his recent comment lead to a rout? An analyst noted that the cryptocurrency reflects far more than Musk's whims.

"While it's true that the world richest man with a Twitter following of 47.6 million people can affect the price any asset, even indirectly with a single comment," Jason Deane, Bitcoin analyst at Quantum Economics in London, told Newsweek, "Bitcoin is ultimately much bigger than one person both by design and practice."

He said that comments such as Musk's typically have little staying power.

"That means any impact is likely to be very short lived and would have no bearing on Bitcoin's long-term price whatsoever," Deane said. "This is because long-term trends, fundamentals and the application of laws of supply and demand will always trump a single opinion, no matter how far it can reach."

Deane said the goals of some retail investors shouldn't be conflated with the institutional view of Bitcoin. In short, Bitcoin is more than the latest hot stock that traders flip and forget after pocketing a profit.

"There's little doubt that some investors see Bitcoin as exactly that," he said," "especially retail investors and short-term traders."

Deane said the market is all about the objectives of the investors.

"Of course, there's no harm in treating it that way if it ties in with your objectives and you can handle—even enjoy—the risks, since volatility and uncertainty can yield high returns, especially in the short term," he said. "However, this is often not the view of institutional investors who are looking to fulfill a specific long-term requirement, most often cited as the preservation of wealth against fiat (currency) devaluation."

Deane said Bitcoin's "hard limit" of 21 million coins means it's not digital fiat currency and therefore doesn't function like one.

"Fiat (currency) is unlimited," he said. "It is inflationary and its value is set by a small number of people in power, meaning it will almost always devalue over time."

But Deane said Bitcoin is a different animal entirely—it's a digital creation.

"Bitcoins are released according to a specific, unchangeable algorithm—it is a disinflationary—and the value is set by the collective actions of users," he said. "The next effect is that it's likely to increase in value over time. Unlike fiat (currency), Bitcoin cannot be copied or counterfeited in any way."