In an annual report that Tesla filed with the SEC earlier, the company declared that it has crypto assets, specifically Bitcoin, valued at $1.5 billion! This is the kind of hype that was needed to give a big boost to the crypto rally. As soon as the news got out, the value of Bitcoin shot up immediately and gained another new all-time high by crossing $48,000. However, the surge was clearly short-lived as the currency slowly trickled back down to below $45k.
At the time of writing, the value of Bitcoin is standing at $44,721. Ironically, the volatility shown by Bitcoin at this time has been compared to the same volatility that investors also saw in Tesla stocks a while back. Furthermore, a note from the strategists at JP Morgan also pointed out the problem of cult following that often comes with such news. They said, “The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of bitcoin.” They are of the strong belief that this volatility will prevent most other major corporate level buyers from buying Bitcoin due to the positive streak.
On the other hand, crypto traders are very much hopeful that corporate entities will now show a lot more interest in Bitcoin now that Tesla has shown its hand. They are looking forward to seeing a bigger rally for the cryptocurrency now that they have received the ultimate seal of approval from Tesla itself. JP Morgan is of the view that since the losses could be significant for corporate buyers, they may not be willing to take the risk, at least not just yet.
The strategists said that the risk that comes with investing in Bitcoin is simply not acceptable for most treasuries. They said, “Corporate treasury portfolios are typically stuffed with bank deposits, money market funds, and short-dated bonds, meaning that annualized volatility – or the range of swings during the course of a year – hovers around 1%.” Given how massive the value is for Bitcoin right now, even a 1% exposure could change the value of their treasury significantly and make their portfolio volatile to as much as 8%!
There is no hiding from the fact that after hitting its all-time high, Bitcoin promptly went on to take a serious drop in value, staying between $30k and $40k for three weeks straight! The company, on the other hand, has announced that it will continue to invest in digital assets and may also start accepting orders for their products soon using cryptocurrency as well. Elon Musk has already declared his support for Bitcoin and even admitted to being somewhat “late to the party.”
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