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- Tesla’s bold bitcoin bet is unlikely to be followed by other major corporates, according to JPMorgan.
- Bitcoin’s volatility is the main reason that will deter more mainstream companies, strategists said.
- Adding a 1% Bitcoin allocation “would cause a big increase in the volatility of the overall portfolio.”
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Don’t expect other large companies to follow Tesla’s $1.5 billion bitcoin purchase, JPMorgan said on Tuesday.
Bitcoin got a huge boost from the electric-car maker’s announcement, which pushed the digital token to a record high of $48,000. But Tesla’s 8% bitcoin allocation is unlikely to be followed by more mainstream corporates, according to analysts led by Nikolaos Panigirtzoglou.
“The main issue with the idea that mainstream corporate treasures will follow the example of Tesla is the volatility of bitcoin,” the bank said in a Tuesday note.
Experts within the crypto industry largely expect Tesla’s bitcoin holding to open up the idea to a whole new class of retail and institutional investors. More corporations appear poised to embrace the world’s biggest cryptocurrency and add it to their balance sheets, said Paolo Ardoino, CTO at crypto exchange Bitfinex. According to him, all the stars may be aligning for the digital asset, as mainstream adoption plays out in real time.
Crypto bull Mike Novogratz added his take on Monday, saying he expects “every company in America” to follow in Tesla’s footsteps and allow customers to make purchases using cryptocurrencies.
But the more traditional JPMorgan said adding a 1% Bitcoin allocation “would cause a big increase in the volatility of the overall portfolio.” Due to Bitcoin’s 80% annualized volatility, an allocation of this size could mean a portfolio’s volatility rises from 1% to 8%, the bank wrote.
The bank, however, didn’t deny that Tesla’s endorsement will favor Bitcoin.
“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 speculative institutional flows via bitcoin futures as well as retail flows,” strategists wrote. How sustained the price surge will be depends on “less speculative” institutional flows like those in the Grayscale Bitcoin Trust.