Bitcoin knows no limits. The cryptocurrency is already trading at $ 50,000 (41,292 euros) driven by the interest of banks and large companies such as Tesla, which announced to invest a whopping 1.5 billion euros in Bitcoin last week.
It has long since ceased to be the currency of computer experts, incomprehensible to the rest, or the currency of choice on the Dark Web, the dark side and without controls of the Internet. More and more companies are betting that Bitcoin will become another means of payment.
Until now, Bitcoin was used mainly as a safe haven, like gold, and few places accept it in exchange for goods or services.
The established financial world until now was wary of Bitcoin’s volatility and its use by people who want to avoid the traditional banking system for a myriad of reasons, often anonymity and illegal goods transactions.
Last Monday, however, electric car company Tesla shook the digital currency markets, saying it was buying $ 1.5 billion worth of Bitcoin as part of a new investment strategy, and that it would soon accept Bitcoin in exchange for their cars.
Next, the Blue Ridge Bank of Charlottesville, Virginia, said it would become the first commercial bank to offer access to Bitcoin at its branches. The regional bank said on Wednesday that cardholders can buy and redeem Bitcoin at 19 of its ATMs.
BNY Mellon, the oldest bank in the US, followed a day later, saying it would include digital currencies in the services it provides to its customers. Mastercard said it would start supporting “select cryptocurrencies” on its network.
A slow but inevitable transition to the means of payment?
Although most expect a slow evolution towards the widespread use of bitcoins as a currency Richard Lyons, a finance professor at the University of California at Berkeley, says it is inevitable. Lyons predicts that Bitcoin and other digital currencies “will become more and more transactional currencies in the next five years. It’s not going to happen overnight,” he said.
Lee Reiners, who teaches fintech and cryptocurrency courses at Duke University School of Law, said BNY Mellon’s move makes sense because “there are now numerous high-net-worth individuals and mutual funds embracing cryptocurrencies as a asset class to add to your portfolio. “
But Reiners believes that companies will continue to hesitate to accept Bitcoin as a means of payment due to its volatility.
“If you were a merchant, why would you accept a payment on an asset that might be worth 20% less a day after receiving it?” Reiners said in an email.
Investors will also have to deal with that volatility. The price of Bitcoin has gone up and down since its debut in the futures market in 2017. A year ago, Bitcoin was selling below $ 10,000. Those fluctuations, analysts warn, could wreak havoc on a company’s bottom line and deter investors.
Assuming Tesla bought Bitcoin at the volume weighted average price of $ 34,445 in January, the company is sitting on a profit of around 38% on its investment. But in the regulatory announcement unveiling the investment, Tesla warned of Bitcoin’s volatility, its reliance on technology for its use, and the lack of a centralized issuer, such as a government.
“While we intend to take all reasonable steps to secure any digital asset, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in partial or full misappropriation or in the loss of our digital assets, and our financial condition and operating results could be adversely affected, “Tesla said at the presentation.
“Tesla is going to have to be very careful and thorough in accounting for its investment in Bitcoin on its books,” said Anthony Michael Sabino, Professor of Law, at the University of St. “Like any other financial asset that is not cash. , it could fluctuate. “
There seems to be some reluctance among traditional companies regarding Bitcoin, at least as an investment vehicle.
During a conference call with investors, General Motors CEO Mary Barra said her company had no plans to invest in Bitcoin, but would continue to “monitor and assess” the potential use of the digital currency. “If there is strong demand from customers in the future, there is nothing to stop us from doing so,” Barra said.