Electric vehicle giant Tesla recently made headlines after revealing it purchased $1.5 billion worth of Bitcoin in last January. However, due to the leading cryptocurrency’s volatility, JPMorgan Chase & Co strategists don’t expect other companies to follow suit.
Tesla’s investment represented 15% of its net cash holdings. The company also hinted that it will soon begin accepting Bitcoin as a form of payment for its products.
The massive announcement helped propel the BTC price to an all-time high above $48,000. Speculation followed that other major companies such as Apple and Oracle would look to invest in BTC.
JPMorgan Analysts Offers Opposite Opinion
However, JPMorgan analysts offered the opposite opinion due to the risks that Bitcoin poses. “Irrespective of how many corporates eventually follow Tesla’s example. There is no doubt that this week’s announcement changed abruptly the near-term trajectory for Bitcoin by bolstering inflows and by helping Bitcoin to break out above $40k,” wrote JPMorgan’s strategists.
“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin. Even making a small 1% allocation in BTC “would cause a big increase in the volatility of the overall portfolio.”
The strategists argued that Bitcoin’s annualized volatility is at 8%. Making the entire corporate treasury portfolio significantly more volatile even with a 1% allocation.
MicroStrategy’s Michael Saylor Sees Things Differently
MicroStrategy’s co-founder and CEO, Michael Saylor, sees things differently and believes companies will be comfortable investing in Bitcoin.
Saylor, who recently purchased $1 million worth of Bitcoin himself, decided to run educational panels for corporations on if and how they could turn the digital asset into their reserve treasury asset.
The reported figures seemed quite impressive as nearly 7,000 enterprises took part. Saylor also doubled-down on his belief that large companies should indeed put most of their excess cash into Bitcoin.
He added that the COVID-19 pandemic “changed everything” in the financial world, as global superpowers began expanding their money supply by 15% or more.
As such, Saylor believes cash is a “dilutive” asset and that corporations should convert their cash holdings to Bitcoin, which would be “really good for shareholder value.”