JPMorgan strategists don’t believe large firms would emulate Tesla’s Bitcoin (BTC) purchase strategy despite the cryptocurrency’s rising price
Tesla made a big statement earlier this week by buying bitcoins worth $1.5 billion and the firm also intends to start accepting the cryptocurrency as a form of payment. The news led to BTC rallying and setting a new all-time high above the $48,000 level.
Following this move, experts have been debating whether it would have a ripple effect and push more corporations to invest in the cryptocurrency market. However, despite the rising prices and increased institutional interest in Bitcoin, JPMorgan strategists don’t think other major firms would adopt Tesla’s Bitcoin buying strategy. The strategists led by Nikolaos Panigirtzoglou wrote that corporate treasurers would likely not adopt Tesla’s model because of Bitcoin’s volatility.
According to the strategists, corporate treasury portfolios are comprised of bank deposits, money market funds and short-dated bonds, with their annual volatility usually around 1%. However, allocating 1% of their spare cash to Bitcoin could lead to a massive increase in the portfolio’s volatility due to the cryptocurrency’s highly volatile nature. “Such an allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualised volatility“, the strategists added.
The strategists feel that while it is unclear if other major firms would follow Tesla’s footsteps, the company’s investment in Bitcoin helped push the price to new highs. “This week’s announcement changed abruptly the near-term trajectory for Bitcoin by bolstering inflows and by helping Bitcoin to break out above $40k“, the strategists wrote. However, the current rally’s sustainability would depend on the investments made into the less speculative funds like the popular Grayscale Bitcoin Trust.
While the JPMorgan strategists don’t think other firms would follow Tesla’s move, Galaxy Digital founder Michael Novogratz believes the opposite is the case. Novogratz is confident that every company in the US will follow Tesla’s decision to invest in Bitcoin and the cryptocurrency could soon reach the $100,000 mark.
Bitcoin rallied to a high of $48,000 on Tuesday following Tesla’s move. However, it lost steam over the past 48 hours and is now trading close to the $45,000 level. Bitcoin’s total market cap is closing in on $1 trillion, and it remains the leading cryptocurrency with a 61% market dominance.