Yesterday, billionaire Elon Musk’s electric vehicle company Tesla Inc. (NASDAQ:TSLA) announced it has bought $1.5 billion worth of Bitcoin and that it will soon start accepting the same as a form of payment for cars.
Now, following that event, investors and industry analysts alike believe that other companies might soon follow Tesla’s list and invest in or hoarding bitcoin.
As the news broke the demand for bitcoin skyrocketed and reached an all-time high of $45,000. Experts from the cryptocurrency market are now expecting that the discloser of Tesla buying Bitcoin will provide a much-needed boost to efforts being made in various countries to accept it as a legal form of payment.
So, the question that arrives here is – has Tesla’s announcement pushed bitcoin usage to the global forum?
Well, the answer to that is a resounding yes. As Thomas Hayes, Managing Member at Great Hill Capital LLC in New York, believes that has the move been made by anyone but the richest man of the world, it might not have taken seriously. But, as that is not the case, everyone is bound to take a second look at Musk’s decision and gauge over its pros and cons.
But, that being said, while the Tesla founder has surely managed to put the world’s most heavily traded cryptocurrency under the global limelight, would it serve as enough encouragement for the world at large to accept bitcoin as a mainstream mode of payment?
The answer to that is quite debatable due to countless challenges which surround Bitcoin and cryptocurrencies in general.
Back in 2013, a crypto enthusiast bought a Tesla Model S by paying for it in bitcoin. The individual paid just under 92 bitcoins which was worth over $100,000 at that time. The deal was sealed and legally approved. But, today if someone considers the same transaction with the real-time value of bitcoin at present, one simply cannot ignore the humongous loss that occurred. Such is the case for most crypto transactions that have taken place over time.
Thus, as of now, most crypto-investors are more comfortable hoarding cryptocurrencies rather than spending or transacting via them – all thanks to its ballooning estimation over time.
The high volatility of value is another factor that stands between Bitcoin and its ability to become a standard medium of exchange. Even though the cryptocurrency has managed to garner a huge community following since its inception, its compact user base largely remains divided about which path it should take and that speculation, in turn, has made the currency overwhelmingly volatile.
The conversion is another huge hurdle for Bitcoin vendors which needs to be addressed as well. As cryptocurrencies are not a fiat currency and tend to hold monetary value only when converted to its cash equivalent, not many vendors are keen on wanting to convert one cryptocurrency to another. Instead, they are more willing to find a payment method which gets exchanged in dollars or any other local currency in use.
This is why the implementation system of Bitcoin or any other cryptocurrency can be a challenge even if bigger brands, like Tesla, try to make it possible. No matter if a business sells electric cars or milk, there still remains a lack of regulations which can facilitate this type of exchange.
Currently, not all countries are on board with cryptocurrencies. Countless state banks have outlawed it and declared cryptocurrency as an illegal tender and imposed heavy fines on violators.
Even in the United States where it is deemed legal, quite recently, William Hinman, the Director of the Division of Corporation Finance at Securities and Exchange Commission aka SEC laid out that Bitcoin and Ethereum are not exactly securities but are replacements for sovereign currencies such as yen, the dollar, the euro, etc. Now, if the majority of all countries continue to take a stance against Bitcoin, it is quite obvious that it will become increasingly difficult for the crypto-type to gain acceptance amid the masses.
Nonetheless, it is also true that despite all the challenges mentioned above, the arguments for Bitcoin continue to evolve as well.
Tesla Buying Bitcoin: Not The First
Tesla is not the first company to add bitcoin to its corporate treasury. Prior to this, Square which is a payments company led by Twitter CEO Jack Dorsey and U.S. software firm MicroStrategy Inc invested $50 million in Bitcoin in October 2020.
Mitch Stevens, an analyst at RBC Capital Market, believes that Apple Inc. (NASDAQ:AAPL) will be the next tech major to endorse crypto by allowing bitcoin to be exchanged on its Apple Wallet service as well as also invest some of their own reserves in crypto units.
Perhaps, one could say Tesla’s move to allocate some of their corporates serves in bitcoin is not necessarily a push towards normalising crypto as a mode of payment but it is a signal that crypto is a mode of storing long-term value alongside the standard dollar and gold.
Graham Tanaka, The President and Chief Investment Officer of Tanaka Capital Management in New York, in a statement about the same mentioned how companies are cautious when it comes to their reserves, and thus it is doubtful that Musk’s move is a flash in the pan, but rather something that is the beginning of a fundamental change.
What are your thoughts on cryptocurrencies being a standard mode of payment? Let us know in the comments down below. We will keep you updated on all future developments. Until then, stay tuned.