Despite some expected near-term volatility, Tesla’s exploration of the crypto realm will likely help the industry scale up to new heights.
Even though Tesla has made its way into the crypto market recently, it generated an immense amount of publicity surrounding the announcement. On Feb. 8, the car manufacturer caught the crypto world off-guard by committing a cool $1.5 billion into Bitcoin (BTC), as well as announcing that the company will soon be looking to accept payments in crypto. As a result of the news, BTC shot up to as high as $48,000 only to subsequently cool down and settle around the $44,500 region.
In the wake of this development, it has also come to light that the above-stated surge was, in large part, driven by whales who took Tesla’s announcement to be a buy signal. In this regard, as per data available on Binance, whales have been dabbling in “unusually large BTC buy volumes.”
Analysts believe that anytime a major publicly listed company makes its way into the digital asset space, a frenzy begins that creates positive market sentiment around BTC. For example, Filbfilb, a pseudonymous Bitcoin trader, stated that as things stand, an increasing number of companies will now be forced by their shareholders to provide them with some level of crypto exposure.
What does Tesla’s move mean for the industry?
According to Hunter Merghart, head of United States operations for cryptocurrency exchange Bitstamp, told Cointelegraph that while Square paved the way for everyone, Tesla adopting Bitcoin on its balance sheets will be viewed as a watershed moment for the industry, adding:
“The risk in further adoption from both retail and institutions is gone. This will eventually lead to further positive price action, as it does take time for new retail and institutional players to onboard and fund accounts.”
A similar sentiment is shared by Sam Tabar, former managing director for Bank of America Merrill Lynch and co-founder of Fluidity — the firm behind P2P trading platform AirSwap — who believes that this is the moment the crypto industry has been waiting for — i.e., receiving an institutional stamp of approval for Bitcoin from an S&P 500 company.
Also, taking a dig at the naysayers, Tabar highlighted to Cointelegraph that just a few years ago, people would scoff at Bitcoin and crypto in general as being a tool for drug dealers and other miscreants. “Then they would claim that Bitcoin takes too much electricity, but if you compare BTC electricity use versus all the electricity that is used in traditional finance, you’d be quite surprised,” he added.
Lastly, Ben Zhou, CEO of cryptocurrency exchange Bybit, told Cointelegraph that Tesla embracing Bitcoin has reduced carrier risk calculations for corporate treasurers and that he now foresees a small but sustained trickle of corporate adoption, including that of multinationals, the cumulation of which will eventually serve a backstop against significant volatility.
In addition, he also believes that as Bitcoin continues to gain acceptance in the eyes of institutions and corporations, the crypto community may become more incentivized than ever before to drive innovation within this nascent space. For example, Merghart believes that in the near future there will see more multinationals exploring Bitcoin and eventually even other crypto assets through borrowing/lending or faster cross-border payments through stablecoins.
Is more crypto diversification inevitable?
While MicroStrategy, Square and PayPal’s recent moves helped garner a decent amount of traction for crypto, there is no denying that Tesla’s acquisition has been the one that has brought the most attention to the industry in its decade-old existence. For proof, one only needs to look at various mainstream media outlets and how pretty much every news platform has covered the story since it broke.
Stephen Stonberg, chief operating officer for Bittrex Global exchange, told Cointelegraph that he believes that the announcement has and will continue to raise awareness for Bitcoin and the cryptocurrency market in general, adding:
“Other U.S. multinationals might well consider diversification of their asset base through other digital currencies that haven’t seen the same appreciation in value as Bitcoin has in the last few months. For too long, investors have confronted negative-yielding bonds and overvalued equities. Now, digital assets provide a real opportunity to diversify.”
The same outlook is shared by Paolo Ardoino, chief technical officer for digital asset trading platform Bitfinex, who told Cointelegraph that Tesla’s announcement may very well bring “cryptocurrency to a new level” and that there may be “no going back” for the industry from here on out. He continued: “I expect Bitcoin to be added to the balance sheet of many corporations as its quality as a form of digital gold becomes only more relevant.”
Lastly, another company whose name has come up recently in regard to Bitcoin is Apple, especially as the multinational is uniquely positioned as a leader within the domain of consumer technology. Kris Marszalek, CEO of digital currency payments platform Crypto.com, told Cointelegraph that if Apple Pay were to extend its support to crypto, the move would be extremely bullish for the firm.
Furthermore, even Marc Benioff, CEO of American cloud-based software company Salesforce, recently tweeted out a cryptic message that read, “Trust is the currency of the realm,” leading many to speculate that the $200-billion company with almost $10 billion in cash may also be considering or has already invested in Bitcoin.
On the subject of diversification, Marszalek opined: “Our world today is one of zero interest rates and endless debasement of fiat currencies. In order to keep up, institutions will have to look towards alternative stores of value, of which Bitcoin is one of the best.”
Not everyone is buying the “hype”
As the crypto market continues to experience an unparalleled amount of positive traction in recent months, there are also many players from the traditional finance sector who believe that Tesla’s move is just a one-off phenomenon and that people should not expect many other big-name players to follow in the company’s footsteps.
For example, strategists for investment bank JPMorgan Chase, led by Nikolaos Panigirtzoglou, believe that Tesla’s $1.5-billion Bitcoin purchase will not necessarily trigger similar investments, with Panigirtzoglou claiming that BTC’s volatility will still continue to keep mainstream corporate treasurers away from crypto.
Similarly, perennial gold backer Peter Schiff also highlighted the fact that Tesla’s new investment policy allows for the purchase of gold bullion and gold exchange-traded funds, even going as far as suggesting that the company is already offloading its BTC investment as the market responds to the news by pumping its value up.
Lastly, Matvey Voytov, chief marketing officer at Waves Enterprise — an enterprise-grade blockchain platform — told Cointelegraph that it is quite unlikely that other enterprises will blindly follow Tesla, saying: “I expect that most big companies will wait, as there are still solid entry barriers in most countries regarding crypto legislations.” He also believes that investors would prefer to take a safe route to invest since “many corporate finance leaders remember being burned in 2008 by higher-yielding choices.”
Crypto proponents point to quantitative easing
Even though the crypto market continues to face daily volatility swings, from a macro perspective, it’s worth remembering the fact that over the course of the last nine months, central banks all over the world have continued to print their local currencies, leading to the unprecedented dilution of most fiat assets.
For example, since the beginning of the COVID-19 pandemic, the United States Federal Reserve has rolled out a number of stimulus packages, with the most recent one being valued at close to $3 trillion. What’s more, the central bank has also vowed to keep printing a total of $120 billion per month for the foreseeable future to help the American economy back on its feet.
Stonberg elucidated that such high levels of quantitative easing “might well lead to multinationals hedging on harder assets, such as limited supply digital assets, gold and silver as a hedge.”