Other large companies are unlikely to follow Tesla Inc. into the world of bitcoin investing, according to J.P. Morgan.
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“The main issue with the idea that mainstream corporate treasures will follow the example of Tesla is the volatility of bitcoin,” wrote Nikolaos Panigirtzoglou.
Tesla on Monday said it had invested $1.5 billion, or about 8% of its cash, in bitcoin and that it would begin accepting the cryptocurrency as payment for its vehicles. The announcement drove bitcoin’s price up 19% to a record high of nearly $46,200 per coin.
The decision sparked discussion on Wall Street as to whether companies should be allocating cash to the cryptocurrency whose price has seen 20% swings in a single day.
Such volatility would create headaches for treasurers who typically park their companies’ cash in low-risk investments like short-term government debt and money market accounts.
Investing 1% of their company’s cash in bitcoin would cause overall portfolio volatility to rise from 1% to 8% due to the “large 80% annualized vol” of the cryptocurrency, Panigirtzoglou added.
General Motors CEO Mary Barra was lukewarm on the idea of investing in bitcoin, saying on Wednesday that the automaker doesn’t “have any plans to invest” in the cryptocurrency but that it will monitor and evaluate customer demand.
Meanwhile, Twitter CFO Anthony Noto told CNBC’s “Squawk Box” that the social media platform is looking at its bitcoin options but that they “haven’t made any changes yet.”
While Twitter and General Motors aren’t yet willing to enter the cryptocurrency space, Sqaure Inc., Twitter CEO Jack Dosey’s other company, said in October that it had purchased 4,709 bitcoin for $50 million. The payments company in 2018 launched bitcoin trading on its Cash App.
A few months later the business intelligence software provider MicroStrategy announced it purchased 70,470 bitcoin for $1.125 billion. That investment’s value had swelled to $3.3 billion at Wednesday’s closing value of $46,481.