The American e-car manufacturer Tesla invested 1.5 billion USD in Bitcoin in January 2021. The news promptly led to a new all-time high of the cryptocurrency. One Bitcoin cost more than 43,000 at times on Monday (08/02/2021), which corresponded to a plus of 12 percent compared to the previous day. Since then, the currency seems to have risen unstoppably. Tesla’s CEO Elon Musk had already spoken frequently about cryptocurrencies and also Bitcoin in the past. The mere mention of the hashtag Bitcoin on Musk's Twitter profile recently helped the cryptocurrency to jump by more than 10 per cent, but this quickly fizzled out again. The statement of US economist and Harvard professor Kenneth Rogoff to the latest developments was quite direct, but certainly has a kernel of truth: "Zero interest rates can produce a lot of funny asset valuations. So that's certainly part of it."
Tesla's entry into the most important of cryptocurrencies could further increase their acceptance. And Tesla is not alone. In October, the payment service provider Paypal announced that it would allow its customers to trade in Bitcoin in the future, which led to a sharp price rise. But who is going to be next?
Other players and potential future ones
In addition to Tesla, there are already a couple of other companies listed on stock exchanges and invested in Bitcoin or offer buying, selling or payments in Bitcoin, for example Square or Microstrategy, but questions the majority cares about are whether one of the major tech companies will join Tesla in the foreseeable future.
The question is not whether other companies will follow, but rather when they will do so. Many companies have already shown their interest in various cryptocurrencies, such as Facebook. however, the idea around the Libra coin was never really implemented. Due to the impact of the pandemic, banks often had to close involuntarily, which in turn led to a significant slowdown in financial processes. This development has probably contributed even more to the causa that large tech companies have long been looking for a suitable alternative to the traditional financial system. Cryptocurrencies are not only faster, more effective and less expensive, they are also permanently available, around the clock, without the need to clear payments from either side. Google prohibited ICOs from using Google Ads services in 2017, they did this because of fraud, later this ban was lifted. Many negative opinions about cryptocurrencies changed their attitude towards cryptos drastically in recent times. A lot of these negative perceptions came from the famous pump and dump era of 2017. There is no excuse other than the "bubble".
Tesla has put almost 8pc of its reserves into the cryptocurrency. If Apple, Microsoft, Facebook, Twitter and Google were to do the same, this would translate into almost another $7bn investment. This is less than 1pc of the total current worth of the Bitcoin market, but the signal that it would send to other companies and retail investors would likely trigger a bull run that would make the current market look comparably stable, as cryptocurrency prices are directly related to supply and demand.
However, not the entire tech industry shares the same euphoria. In a television interview with the Bloomberg agency, Microsoft founder Bill Gatestook a completely different position - and warns against the hype surrounding cryptocurrencies. "If you have less money than Elon, you should be careful," is Gates' advice. He then criticized the high energy consumption of blockchains and the fact that anonymized transactions could also circumvent regulations for money laundering and terrorist financing. It is true that the Gates Foundation is also working on digital currencies, but taking a more local approach. So perhaps Microsoft is not expected to make a major investment in Bitcoin in the near future, but you can never be 100% sure at this time.
Special outlook on Apple
At the same time as Tesla's SEC filing, global investment bank RBC Capital Markets revealed that Apple could be able to rapidly increase market share by implementing a mechanism to allow the sale and purchase of various cryptocurrencies within Apple Wallet. The research report related to that, even suggesting that it would be beneficial for Apple to do a move similar to Tesla concerning buying cryptocurrencies.
According to RBC, such an endeavour would entail limited R&D costs, but has the capacity to deliver more than $40 billion in annual revenue. In addition, Apple is known to have a competitive advantage over PayPal and Square due to its reputation for a secure and closed ecosystem.
Although Apple delisted some bitcoin wallet applications from the App Store in 2014, just to change its position later that year, it is no mystery that Apple has been eagerly entering the fintech space. Apple Pay, the mobile payment and digital wallet service, was launched in 2014. And in 2019, CEO Tim Cook publicized the Apple Card, a digital credit card jointly developed with Mastercard and Goldman Sachs.
It is still unclear when and to what extent Apple will comply with RBC's recommendations, but it is clear that keeping a close eye on future developments could heavily contribute to the right actions in one’s cryptoportfolio.
Author: Georg Giulini