Friday, June 18, 2021

JP Morgan: Tracking Tesla by investing in Bitcoin is a huge risk

The global investment bank, “JP Morgan”, said that it does not count on other major companies to emulate the decision of Tesla, the American company, the largest manufacturer of electric cars in the world, to add the cryptocurrency “Bitcoin” to its balance sheet, and accept it as a form of payment When buying its electric cars.

“The main problem resulting from corporate treasurers adopting the Tesla model is the volatility of Bitcoin,” wrote the strategists at the bank led by “Nikolaos Banegertzoglou” in a note: “However, they say (treasurers) that it is her step.

(Tesla) sheds light on the trend (of Bitcoin). “

Tesla revealed on Monday that it has invested $ 1.5 billion in Bitcoin and intends to start accepting it as a dues payment currency. Tesla’s announcement pushed the digital currency’s price to record levels, above $ 48,000 sometime Tuesday.

Experts are now debating whether Tesla’s risky move will have repercussions for cryptocurrencies, and whether other CEOs in the companies listed for circulation will make similar investments.

Corporate treasury portfolios typically include bank deposits, money market funds, and short-term bonds, meaning that annual fluctuations – or the range of fluctuations during the year – hover around 1%.

A 1% investment of a company’s funds in Bitcoin significantly increases volatility in the overall portfolio, the analysts write.

Analysts said that such an allocation of “investment in Bitcoin” may mean that fluctuations in the portfolio rise to 8% due to the annual fluctuation of “Bitcoin” by 80%.

Investing in digital assets
Speculators were comforted by Tesla entering the world of cryptocurrencies, arguing that it was pushing digital assets into the mainstream of investment, like other existing assets.

After Tesla announced its investments in Bitcoin, Michael Novogratz, founder of the digital investment firm Galaxy Digital, suggested that “every company in America” ​​accept a method of payment.

“Regardless of how many companies follow the Tesla model, there is no doubt that this week’s announcement has surprisingly altered the near-term trajectory of Bitcoin by boosting flows, and helping Bitcoin surpass 40,” analysts at JP Morgan wrote. one thousand dollars”.

How far Bitcoin continues to rise may depend on whether “less-guessed” institutional flows are materializing – such as those in the Grayscale Bitcoin Trust, which invests in the digital currency.

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