Should Tech Giants Dive Into Cryptocurrencies After Tesla?
Tesla recently stated of purchasing $1.5 billion bitcoin; the company may begin accepting it as a mode of payment. According to news reports, Tesla closely followed Microstrategy Incorporated’s footsteps, a business analytics and mobility provider of entering the crypto space. Earlier speculations were rife: Was the technology giant really going to deal in Bitcoins. However, these questions came to a close soon after Tesla filed the reports with the Securities and Exchange Commission (SEC), putting speculations to rest. The report suggests that Tesla moved in favor of Bitcoin because it aims to expand its business operations horizon and increase the return on investment.
Tesla will soon embrace Bitcoin as a new payment option from its customers but within the law and regulatory bodies’ borders. By the end of last year, the company reportedly had $19 billion as cash at hand, which will partly be channeled to cover this investment to some extent. Interestingly, just as many of Elon Musk’s Twitter hashtags have led to many market trends, like tweets related to Signal, this announcement too led to a 20% rise in the value of bitcoin. Media reports also suggest that the news of Tesla’s bitcoin deal has created a storm in the technological world, with many business insiders and financial analysts suggesting other business leaders may follow suit.
As per the reports filed by Tesla with SEC hint that the move intends to arrest the bitcoin opportunity as an alternative asset, Tesla also has a competitive advantage because it has its distribution channel, unlike other automotive players. Other than Tesla, business groups like Square Inc, a mobile payments solutions provider, and Microstrategy Incorporated have shown their strong support by purchasing bitcoins at $50 million and $ 1.3 billion. Elon Musk is a staunch supporter of digital currency and believes that cryptocurrency will soon transform the future of finance and how people view it.
RBC capital markets, a global investment and banking service provider, strongly points at Apple’s capability to step into the foreground of cryptocurrency’s lucrative market. Apple can now capture the cryptocurrency market and bridge the gap between end-users and their need to find a robust crypto platform abiding by the regulations simultaneously and report the news media.
RBC believes Apple’s ability to capitalize on market opportunities in the cryptocurrency market. The iPhone players will be able to gain $40 billion, placing the US market on the world number one in the future technological space, state the report by RBC. Mitch Steves, Financial analyst at RBC mentioned that, “Apple’s install base is 1.5 billion, and even if we assume only 200 million users would transact, this is 6.66x larger than Square,” according to the report. “Therefore, the potential revenue opportunity would be in excess of $40 billion a year (15% incremental top-line opportunity).”.
Furthermore, comparing the research and development (R&D) expense with the R&D budget of Square Inc of $1 billion, the report further states that it would still be nominal. It also suggests that it can transform its payment platform, Apple wallet, into the crypto wallet to achieve this feat. RBC report also suggests the iPhone company can move to reflect the digital currency in its Balance Sheet if the move goes through successfully.
Many financial analysts and business insiders stand divided on whether the world’s leading companies should dive into the crypt world. A media report suggests Tesla’s bitcoin purchase can cause trouble in its bottom line operations. However, Tesla’s move of making a $1.5 billion bitcoin purchase and RBC’s report suggesting lucrative financial gain speaks volumes in this regard—hinting other businesses can flock together in the crypto world.