JPMorgan Doesn't Believe Other Big Corporations Will Purchase Bitcoin
Following Tesla's announcement, Bitcoin surged to a record high of $48,000. JPMorgan analyst Nikolaos Panigirtzoglou does not believe other large corporations will be following suit. "The main issue with the idea that mainstream corporate treasures will follow the example of Tesla is the volatility of bitcoin," the bank said on Tuesday.
Some experts disagree with JPMorgan. Paolo Ardoino, CTO at crypto exchange Bitfinex believes that Tesla's investment showed the world that Bitcoin is the future of payment processing. Crypto bull Mike Novogratz stated that "every company in America" will soon follow in Tesla's footsteps to get in on the cryptocurrency.
However, JPMorgan argues that the cryptocurrency is too volatile to become a mainstream investment for large corporations. According to their analysis, adding a 1 percent Bitcoin allocation "would cause a big increase in the volatility of the overall portfolio." Bitcoin's 80 percent volatility poses a challenge for risk-averse companies.
"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," the bank said.
Bitcoin is highly speculative and volatile. Tesla went on a limb, unsurprisingly, to be the first major company to hold the cryptocurrency on its balance sheet. Time will tell if this investment pays off.