After Tesla decided to invest $1.5 billion in bitcoin, analysts expect a stream of other companies to follow. Mad Money’s Jim Cramer thinks all companies should put bitcoin on their balance sheets, and Twitter reveals it’s already thinking about it.
Other companies will follow Tesla’s lead in bitcoin, analysts say
Following the groundbreaking decision by Elon Musk’s company Tesla to invest $1.5 billion of its cash reserves in bitcoin, many expect other companies to follow suit.
Mad Money presenter Jim Cramer applauded Elon Musk and Tesla for doing more with their money and being on the front lines. He said on Tuesday:
Treasurers of all companies should consider diversification. Get money in bitcoins.
The Tesla bitcoin announcement has also prompted retailers around the world to buy bitcoin, including in India, where local cryptocurrency exchanges have seen spikes in cash deposits, new listings and trading volumes since the Tesla bitcoin announcement. Global cryptocurrency exchanges, including Coinbase, Binance and Kraken, have seen a similar trend.
Don Wyper, chief operating officer of Digitalmint, said Tesla has about $20 billion in cash or cash equivalents on its balance sheet, so $1.5 billion in volatility would have less than a 10% impact on the company.
Carlos Betancourt, co-founder of Bkcoin Capital, noted that Tesla’s purchase of bitcoins could be a catalyst to grow bitcoin’s market capitalization to $1 trillion, adding that with this move, a company like Tesla will only accelerate the adoption of crypto as an alternative investable asset class.
David Mercer, CEO of Lmax Group, said his company expects 2021 to be the year many more big names make an official move into space. He stated: We expect the earlier decline in institutional investment to turn into a huge tidal wave for the rest of 2021 and beyond:
Institutions currently view bitcoin as a cash asset, and it is inevitable that all companies will allocate a portion of their reserves to this now proven, reliable, and value-bearing asset. We think corporate treasurers will consider allocating 5-10% of bitcoin reserves.
We believe this is just the beginning of a wider use of private institution names that are finally ready to enter the crypto space, noted Joel Krueger, digital currency strategist at Lmax. At the same time, we should not expect a significant continuation of bitcoin’s upward trend.
Simon Peters, analyst at Etoro, describes: We hope others will follow Tesla’s lead. Bitcoin payments will become increasingly useful for businesses that do almost all of their sales online. He pointed out that this has huge implications for companies and said that if companies as large as Tesla, worth nearly $1 trillion, believe bitcoin can be used in this way and are willing to back up their position with actions, others will undoubtedly start to consider it. In addition, the analyst believes that
Tesla has diversified its own business by investing heavily in bitcoin. We believe that other companies will also consider buying bitcoin as a diversification tool and as insurance against the devaluation of other currencies.
Yang Li, head of development at Ziglu, expects the borderless nature of bitcoin to help Tesla optimize its finances and cash flow, especially when it comes to entering new markets. In addition, inflation will inevitably run high as the world’s governments continue to aggressively stimulate the economy during the current pandemic. Investing in bitcoin allows Tesla to protect its current assets from inflation and perhaps even make a profit if the price of bitcoin continues to rise, as it has in the past.
On Wednesday, Twitter CFO Ned Segal said on CNBC’s Squawk Box that his company had thought carefully in advance about how it could pay its employees or suppliers if they wanted to pay in BTC, and whether it should have bitcoin on its balance sheets. He noted that no decision has been made yet and reiterated that Twitter continues to investigate and monitor this issue.
Meanwhile, not everyone is convinced that Tesla’s initiative will be followed by other companies. JPMorgan analyst Nikolaos Panigirtzoglu, for example, doubts that more companies will add BTC to their balance sheets, as this would lead to a sharp increase in overall portfolio volatility. General Motors CEO Mary Barra said Wednesday that GM has no plans to invest in bitcoin.
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