Here is some free advice to the Honda Motor Company: Market Your Cars to the New Bitcoin Rich.
I already have the copy of the ad for you.
A real bitcoiner builds for the future and postpones satisfaction. She doesn’t blow her hard-earned savings into flashy toys. She prefers a solid, reliable family car.
Lambos are for losers. HODLers drive Hondas.
Marc Hochstein, CoinDesk’s editor-in-chief, owns Bitcoin, and if he were smarter he would have bought it more years ago. This article is an excerpt from The knot, CoinDesk’s daily recap of the most important stories about the future of money and Web 3.0. Here you can subscribe to the full newsletter.
OK, so I’m not a Don Draper. It is doubtful whether Honda or any other affordable automaker would follow my suggestion anytime soon. For luxury electric vehicle maker Tesla, that’s different, which need not be said – it already does something similar.
Diamond hands
This week, the manufacturer began accepting Bitcoin (BTC) as a means of payment for its cars, fulfilling a promise made by its mischievous CEO Elon Musk in early February. Musk underscored his confidence in the currency, declaring on Wednesday that Tesla would keep, rather than convert, bitcoin it earns from car sales.
Typically, the rare merchant who accepts crypto as payment for goods or services will immediately exchange them for US dollars or another fiat currency. This is understandable given the price volatility and the low likelihood that a merchant’s suppliers will take magic internet money. But the Tesla boss said his company was HODLing.
For the uninitiated, HODLing is bitcoin slang because they refuse to sell BTC, either to take profits in a bull market or to reduce losses in a bear market. Based on the drunken spelling of a forum poster of “hold”, the word by and large means a steely determination in the face of fear, uncertainty, and doubt. A HODLer is someone who, to borrow from Rudyard Kipling, “can keep your head when everything around you is / loses its and blames you”.
Not Satoshi Nakamoto (Creative Commons)
Musk is clearly someone, at least in a narrow sense, who has invested $ 1.5 billion in Bitcoin for Tesla’s corporate treasury since this year. In the past 12 months, the price of the cryptocurrency has risen nearly 700% as fears of inflation, a self-continuing hype cycle, and possibly boredom with the pandemic fueled purchases by individual and institutional investors. Like Tesla, for example.
While I’m sure Musk would like to add to Tesla’s BTC stash one at a time, I strongly suspect that this is not his only or main motivation.
Rather, my gut is that the payment option is, at least in part, if not primarily, a clever marketing maneuver.
Incentives for HODL
First of all, there is no indication that Tesla is offering a discount to buyers paying with Bitcoin. This is what the company might expect if its main goal is to get more of it. Tesla certainly also understands that Bitcoiners are strongly discouraged from parting with their “sats” (an affectionate nickname for the smallest unit of currency, 0.00000001 BTC, in homage to creator Satoshi Nakamoto).
This is partly due to the reason I alluded to in my quixotic Honda pitch: Bitcoin is inherently deflationary. There is a set amount – 21 million BTC – that will ever be minted. However, as it grows in popularity, it hurts the buyer in the long run to name things like luxury cars in Bitcoin.
While the price fluctuates widely from one minute to the next, Bitcoin has generally appreciated in value over time if you zoom out the lens really far, which encourages saving (or “hoarding,” depending on your worldview). Do you remember the pizza that was bought for 10,000 Bitcoin in 2010? Ten thousand bitcoins are worth $ 500 million today. Hope the pizza tasted good.
Would you sell your birthright for a piece? No? How about the whole cake? What if I throw some garlic bread in it? (Nicolás Perondi / Unsplash)
In the US, crypto is also treated as property for tax purposes. So if you buy a coin for, say, $ 1 and it doubles in value and you spend that extra dollar on a cup of coffee, you should report the purchase to the Internal Revenue Service and pay tax on it. It remains to be seen whether Uncle Sam will follow up every last Joe Schmoe who doesn’t report a chubby purchase. However, it’s reasonable to assume that anyone who uses crypto earnings to buy a Tesla (which can range from $ 39,000 to $ 150,000) will show up on the tax officer’s radar.
Even if a buyer can overcome these hurdles, Tesla doesn’t make it easy. As Daniel Kuhn from CoinDesk reported on Thursday, when paying Tesla with Bitcoin, a car buyer has “about 30 minutes” to complete the transaction, otherwise the price in BTC will expire and a new one has to be requested. Also, Tesla will only accept exact amounts and will not refund payments sent to an incorrect address.
All in all, it can make more sense to pay with fiat, even if you have large sacks of bitcoin, be it for a Tesla or a large latte.
Tribal signaling
Crypto is already obsessed with one car: the Lamborghini. But it’s more of a joke than anything. If Tesla became the true status symbol in this industry, it could move the needle.
By embracing the bitcoiner culture, Musk will likely get more sales below this amount than they would otherwise, even if they settle in greenbacks. Any extra bitcoin that Tesla picks up would be gravy.
In Wednesday’s tweet, Musk also revealed that Tesla is running its own node instead of relying on a third party to tell him what is happening on the Bitcoin network. This is considered a best practice for advanced users, but it is also a signal to the tribe: I see. I am one of you. It closely connects the Tesla and Musk brands with the ethos of the sovereign individual who enlivens the crypto community, not least the Bitcoin believers.
The Absolute Mad (NORAD and USNORTHCOM Public Affairs)
Think of it as an odd twist in affinity marketing in the 21st century, but without a formal partnership like the one my college had with a credit card lender in the 1990s, which resulted in me going into debt for getting things billed that I hadn’t done. I neither need nor could I afford it. Thank you, alma mater; I wish Bitcoin was there back then to make me clear.
There’s also a less charitable take on Musk’s news: that he’s trying to divert attention from bad news for Tesla. As CoinDesk’s Muyao Shen reported in February, the big coming-out party coincided with the reveal by Chinese officials that they were questioning Tesla on quality and safety issues. And this week’s Bitcoin announcement conveniently came right after reports that U.S. regulators were reviewing Tesla’s autopilot technology.
If so, my guess is that these explanations are not mutually exclusive. Tesla HODLing Bitcoin could be a cynical PR move and marketing coup – and at the same time a sincere takeover of an innovation in the world of bits by an innovator in the world of atoms. Binary thinking is for fools.
It is far from certain that, if it does, the marketing ploy will work. “I’m not entirely sure if anything else was sold in Bitcoin,” a Tesla representative told my colleague on Thursday.
But it’s better for my money than anything Madison Avenue can think of.
UPDATE (March 26, 10:22 PM UTC): Added some links.
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