The crypto market went insane this week when Elon Musk announced that his company is accepting Bitcoin as a means of payment for every Tesla model.
While this resulted in an initial price spike, reading the fine print reveals a certain situation for anyone using the cryptocurrency to make payments. Here are some things to keep in mind when looking to spend BTC on a Model S, Y, or 3.
Tesla starts accepting Bitcoin as a payment option
Elon Musk has been pumping the crypto market for a number of years for one reason or another, with it initially being primarily some cheeky fun the CEO had with the Dogecoin community.
Over time, the eccentric entrepreneur and visionary fell in love with the cryptocurrency market and often commented on the state of affairs. More recently, however, following a rumor between Musk and MicroStrategy CEO Michael Saylor, Tesla announced that bitcoin bull Musk had included in his BTC buying playbook that he had also bought BTC to help keep the companies’ treasure reserves to increase.
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At the same time, the company announced the plan to support the acceptance of Bitcoin as payment, which was activated on the automaker’s website this week.
Musk’s tweet announcing the introduction of bitcoin payments initially pushed the price of the leading cryptocurrency by market cap up, but a rejection has since created serious volatility.
Bitcoin pumped immediately after Musk's tweet, but was used to fake out traders | Source: BTCUSD on TradingView.com
Read the fine print when buying a Tesla with BTC
While the sell-off wasn’t due to discovering a clause in the fine print for someone using BTC to buy a Tesla, there is language that makes the situation a lot less positive overall.
In the fine print when buying a vehicle with BTC, you will find a tick 22 that explains that Tesla is free to decide how a buyer will be reimbursed – either via BTC or USD – at its own discretion.
In plain English, Tesla can instead refund the vehicle purchase in USD if the price per BTC is significantly higher than the time the buyer spent his coins.
The Refunds and Buybacks section of the Tesla fine print reveals unexpected risk for buyers | Source: Twitter
If Bitcoin dumps hardcore for some reason and that initial BTC is now worth far less than its USD equivalent, Tesla will give you the now cheaper BTC back instead.
According to Wikipedia, “one connotation of the term is that the creators of the catch-22 situation created arbitrary rules to justify and hide their own abuse of power.”
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Tesla, as a company in power in this business transaction in BTC, bears the risk associated with Bitcoin’s notorious volatility as a burden that only the buyer bears.
This makes sense from a business perspective, but it doesn’t exactly match the transparency and lack of third-party control that the cryptocurrency space is used to. However, the more controlling companies get into cryptocurrency, the more they will try to control the conditions that may not be as good as it should be for Bitcoin.
Featured image from Deposit Photos, Charts from TradingView.com