Tesla bought $1.5 billion in bitcoinhere are the risks it sees (TSLA)

<p><img src="https://static4.businessinsider.com/image/601d669619cbd800188afede-2400/GettyImages-1229892934.jpg" border="0" alt="GettyImages 1229892934" data-mce-source="Pool/Getty Images" data-mce-caption="From GameStop to obscure gold miners, Tesla boss Elon Musk can move markets"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Given Tesla CEO Elon Musk's very public obsession with cryptocurrencywhich has him tweeting about bitcoin and <a href="https://www.businessinsider.com/tesla-ceo-elon-musk-sends-dogecoin-cryptocurrency-up-35-tweets-2021-2">Dogecoin</a> sometimes several times a dayone might think he considers investing in cryptos a no-brainer.&nbsp;</p><p>But when the electric-car maker announced Monday that it had <a href="https://markets.businessinsider.com/currencies/news/tesla-buys-bitcoin-elon-musk-stock-accept-form-of-payment-2021-2-1030055107">bought $1.5 billion worth of bitcoin</a>, it acknowledged that the investment carries substantial risk.&nbsp;</p><p>In a <a href="https://www.sec.gov/Archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm#Item_11">document</a> filed with the US Securities and Exchange Commission, Tesla noted numerous risk factors associated with investing in bitcoin, including the currency's volatility. Bitcoin has experienced searing ralliesit's up well over 400% over the last yearand precipitous drops, leading many institutions to <a href="https://markets.businessinsider.com/currencies/news/warren-buffett-best-quotes-bitcoin-cryptocurrencies-investing-rat-poison-squared-2021-1-1029974898">dismiss the currency</a> as too unpredictable.&nbsp;</p><p>The "highly volatile" nature of digital assets may continue as a result of several factors, Tesla said, including that "the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable."</p><p>Tesla also named digital assets' decentralization and reliance on technologytwo characteristics that draw investors to cryptocurrencies in the first placeas risks.&nbsp;</p><p>"Their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence," the company said. As bitcoin has surged in value, there have been several stories of people who either <a href="https://www.businessinsider.com/man-offers-council-70-million-dig-up-bitcoin-hard-drive-2021-1">misplaced hard drives</a> containing their digital wallets or <a href="https://www.businessinsider.com/programmer-locked-out-220-million-in-bitcoin-forgotten-password-2021-1">forgot passwords</a>, locking them out of their cryptocurrency fortunes.&nbsp;</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/carbon-capture-startups-to-watch-elon-musk-prize-2021-1">Elon Musk is giving $100 million to the best tech that sucks up carbon emissions. These 4 startups are leading the way.</a></em></p><p>Developments in how regulating bodies like the SEC treat cryptocurrencies could also impact its future value, the company said. The head of the European Central Bank has <a href="https://markets.businessinsider.com/currencies/news/bitcoin-enabled-criminal-money-laundering-regulated-ecb-president-says-2021-1-1029965194">argued</a> that cryptocurrencies should be regulated to crack down on money laundering and other illegal activities. And the US Treasury Department <a href="https://www.businessinsider.com/crypto-exchanges-urge-us-treasury-to-slow-regulation-push-2020-12">proposed regulations</a> late last year that would require cryptocurrency exchanges to log personal details about their users like banks do.&nbsp;&nbsp;</p><p>Hacking and technological glitches could also pose a problem for Tesla's bitcoin holdings, the company said.&nbsp;</p><p>"As intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets," Tesla wrote.</p><p>&nbsp;"While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed."</p><p>As for the upside in investing in bitcoin, Tesla said the decision was part of a plan to "provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity."</p><p>In the regulatory filing, the carmaker said it plans to accept bitcoin as a form of payment for its vehicles in the near future.&nbsp;</p><p><a href="https://www.businessinsider.com/tesla-bitcoin-investment-risks-2021-2#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/worlds-most-expensive-liquid-thoroughbred-horse-semen-2020-3">Why thoroughbred horse semen is the world's most expensive liquid</a></p>
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