Laszlo Hanyecz said he wouldn’t spend his Bitcoins on a Tesla. Mr Hanyecz knows what he’s talking about: In 2010, he paid 10,000 Bitcoins, worth about $446 million at current prices, for two pizzas.
It was the first known commercial transaction of cryptocurrency. Back then, Bitcoin’s price stood at less than a penny. It hit an all-time high of about $47,000 on Tuesday, the day after Tesla said it bought $1.5 billion in Bitcoin and will accept the digital currency for the purchase of cars.
“Personally, I am not too interested in Tesla,” Mr Hanyecz wrote in an email. “If you give it five years, I think the Bitcoin you’d spend will be more valuable than the car.”
What separates Bitcoin from a typical fiat currency, of course, is volatility. A dollar won’t be worth substantially more or less tomorrow. During the Bitcoin frenzy of 2017, some people bought Lamborghinis with their winnings. Other Bitcoin holders watched as the price fell by more than 80 per cent the next year, before quadrupling last year.
People tend to treat Bitcoin as a risky investment, rather than as a checking account. When Bitcoin rallied, especially in the latter part of last year, average monthly transactions of various cryptocurrencies processed by BitPay fell 27 per cent.
Merchant-related transactions accounted for 0.3 per cent of cryptocurrency spending in 2020, with the remainder dominated by an explosion of trading, according to researcher Chainalysis.
Transacting in Bitcoin is a risk for companies, too. Elon Musk has been more willing to gamble than most, dating back to his role as co-founder of the pioneering online payments company PayPal and more recently, to his fascination with the joke currency Dogecoin.
Tesla’s bet on Bitcoin follows a few others, including MicroStrategy and Square, that invested as a hedge against inflation. The moves boosted their stock prices when Bitcoin rose, but it can easily go the other way. For investors and corporate finance departments, it also makes earnings forecasting a lot more difficult.
For most people, buying a car is a big financial decision, and it’s unwise to introduce another potentially life-changing factor on top of that, said Mr Hanyecz. While he said he doesn’t regret buying those pizzas, Mr Hanyecz said people are better off using a credit card.
