Tesla’s $1.5bn Investment Allocation In Bitcoin – Commentary

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With the news breaking today of Tesla’s $1.5bn investment allocation in Bitcoin, several crypto experts have weighed in on what the news will mean for the crypto ecosystem and financial industry moving forward. The consensus is that corporate treasuries and institutional investors will follow suit and pile into Bitcoin, opening up new opportunities and trends for the crypto market and investors.

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Tesla’s $1.5 Billion Investment Bitcoin

A diverse range of experts provide a commentary on today’s revelation for the crypto and financial industry.

Eric Kapfhammer, COO and Head of Polyient Capital, said:

Tesla’s bitcoin disclosure could end up being looked back upon as the event that ensured cryptocurrencies crossed the chasm into the mainstream. Not only will the impact of this be felt across the corporate world, but due to Tesla’s high profile, it could end up being a trigger for popular retail adoption. The period of time between 2017 to present has seen a tremendous amount of progress on the development of the infrastructure layer that serves to enable cryptocurrencies to plug-in to the “real” economy. That infrastructure – technical, legal, financial, and regulatory – has set the stage for the recognition of cryptocurrencies as viable reserve assets within corporate treasury holdings. While each company will weigh the risks and rewards of introducing these assets into their portfolio differently, the fact that Tesla has jumped aboard the bitcoin train provides a high-profile comparable to at least facilitating that conversation. 

Luis Cuende, Co-founder of Aragon, said:

Tesla’s move into Bitcoin is incredibly bullish for cryptocurrencies, and officially confirms crypto as a reserve asset for corporate treasures. Today’s news confirms the world’s wealthiest entrepreneur and his company going full-on crypto.

With asset managers like Ray Dalio and entrepreneurs like Michael Saylor and Elon being bullish on BTC, more and more corporations will recognize it as a reserve currency for treasuries. Next, national treasuries will follow. The infrastructure for corporations to invest in crypto has been in place for years, so now it’s just a matter of time before corporations consolidate around BTC.

Bitcoin’s Potential As A Corporate Treasury Asset

Philippe Bekhazi, CEO of Stablehouse, said:

Tesla’s decision is another validation of Bitcoin as a potential Corporate Treasury asset. ‘Gold 2.0’ in a world of poor monetary policy management. This further reduces the ‘job risk’ for CFOs who had considered this previously. It could even make it mandatory for them to consider it now. In many ways, this is a very bullish aspect of the Bitcoin as money story and Bitcoin as gold story and a hedge against sovereign state money inflation. 6% of all bitcoin is held in publicly listed entities and at least 20 corporate treasuries have stated publicly that they hold BTC including Square, Tesla and Microstrategy. 

There is no doubt that the game is quickly evolving. There is little else to do than the current narrative to help with persuading CFOs and CEOs. Perhaps regionally, Governments should support crypto currencies instead of taking a defensive stance (e.g. India’s rumors of banning all but India issued state coins)  Also, banks will have to move quickly to accept companies that hold bitcoin, in the EU for example it is often that they block transfers to BTC onramps, and globally mentioning BTC in a business plan could block one’s bank account access.

Amber Ghaddar, PhD, Founder AllianceBlock, said:

There seems to be a new trend of corporate treasuries, specifically those whose core business is in tech or emerging tech like square and micro strategy and today Tesla, investing in bitcoin.  This could look like an odd mix as traditionally corporate treasuries have a conservative cash management approach, allocating the majority of capital to low risk assets like money markets and Tbills. The increasingly low rate (close or below zero)and aggressive fiscal and monetary policy can be a headache to cash rich treasuries and can even destroy shareholder value. So it seems to me that more traditional treasurers should at least look at bitcoin for a small allocation within their alternative portfolio.

With the streamlining of digital custodians, the trend should continue with more – at least tech oriented – treasuries allocating BTC to their treasuries. With the current fiscal and monetary landscape, I wouldn’t be surprised to have an announcement from some of the tech giants Facebook or Google within the year but I think the road is still long for the more traditional treasurer.

Enterprise Adoption Of Crypto Assets

David Wachsman, CEO and Founder of Wachsman, said:

Enterprise adoption of crypto assets has been the theme of 2021 thus far, with the decision by Tesla to invest $1.5 billion in Bitcoin being one of the most notable examples of corporate adoption to date. The narrative of Bitcoin as an inflation hedge continues to hold water among corporates and institutional investors, with prominent advocates for investing in Bitcoin as a treasury asset, such as MicroStrategy’s Michael Saylor likely driving this move by Tesla. 

Adoption begets adoption, and Musk’s investment in Bitcoin will significantly accelerate the feedback loop of institutional adoption legitimizing crypto assets. The signs of institutional fear of missing out (FOMO) on crypto as the next major asset class are already visible, and it will be interesting to see if this move prompts a wave of other enterprises and institutions to follow suit.

Seamus Donoghue, VP Sales and Business Development at METACO, said: 

The decision by Musk to invest $1.5 billion into Bitcoin has been the catalyst to break out of the recent range and push Bitcoin to new all time highs. Bitcoin as a corporate treasury asset is not yet a mainstream business strategy, but firms like Microstrategy and now Tesla are highly visible advocates of corporate treasuries allocating reserves to Bitcoin. MicroStrategy’s Bitcoin strategy sessions last week reportedly saw 1,400 corporate treasuries participating. It remains early but with such vocal sponsors leading corporate adoption, further adoption will follow much faster than currently expected. 

The most credible objection for corporates, or any other institution considering adopting BTC as an asset class is that it remains–at roughly $800 billion–a relatively small asset class. However, as the asset class grows, and it has grown 14% on the Tesla announcement alone, the liquidity concerns diminish making it eligible as an investment to a broader investor base. Such a virtuous liquidity cycle will draw in considerably more allocations as it grows.

A Tesla Roadster For 5 To 2 Bitcoin

Antony Welfare, Executive Director, Enterprise at NEM Software, said: 

The precedent set by Tesla will be far reaching and signals a huge step to greater global adoption of BTC and crypto currencies in general. A Tesla roadster is currently $250,000 which is approximately 5BTC, by the end of this bull market it will be more like 2BTC. 

With the lack of return from bonds or dividends and the significant returns available from “new financial assets”, corporate treasurers clearly believe that crypto and digital assets are the obvious asset class to look at next. This news, together with the expansion of ETH products (CME today launched Ether futures) and Bitcoin ETFs, indicates that blockchain based financial assets are part of the fiduciary duty of all corporate treasurers.

Konstantin Richter, CEO and Founder of Blockdaemon, said:

Elon Musk is no stranger to cryptocurrencies, however the investment from Tesla drives confidence for not only retail customers, but also institutions looking to invest significantly larger sums in crypto assets. We’re seeing momentum here where each new institutional participant to the Bitcoin market has to buy less BTC for more USD and still the market shows no signs of slowing down. This signals confidence to the retail market, but more importantly demonstrates the worth of hedging against macro-conditions by having Bitcoin on corporate balance sheets. This investment will accelerate discussions among corporate treasurers throughout the ranks of the S&P 500 to put plans to buy BTC into motion. It is likely that these new institutional inflows could push this Bitcoin rally to new heights. As Bitcoin and the broader crypto ecosystem continue making inroads, more investors are looking to the fixed income and pension entities to fuel further interest and growth. It is clear that we are entering an entirely new phase of the market.

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