Many believe that under the impact of the investment that Tesla poured into Bitcoin, the digital currency in the future will be transformed into an asset class like gold.
On February 12, Elon Musk’s $ 1.5 billion investment announcement caused Bitcoin’s price to reach $ 49,000, up 300% from 2020. It can be seen that the growth rate of Bitcoin value has many similarities. with Tesla’s growth.
This move by Elon Musk is said to bring many benefits to Tesla in the future, especially during the crypto boom. “Tesla does not possess a huge amount of cash assets. But investing 8% of its existing cash in Bitcoin shows how much the electric car company is relying on the currency,” Financial market director of cryptocurrency exchange OKEx, Lennix Lai said.
Tesla and Bitcoin S&P Growth Index
In fact, since the virtual currency lost its record value in March of last year until now, Bitcoin has tended to function as a kind of stock instead of becoming a trustworthy asset, one of the traits that many investors have. I want it to become.
Bitcoin is limited issued and completely independent of central governments and banks. In theory, this digital currency needs to be strong and able to withstand the fluctuations that traditional markets cause. That is why Bitcoin should behave like digital gold, one of the last hedge assets.
Bitcoin price fluctuates continuously
In fact, after the massive slump in early 2020, the cryptocurrency has seen a rebound thanks to a number of capital factors that propelled the stock market to record levels, including a series of stimulus packages from itself. government and high liquidity from central banks to support the economy through the Covid-19 pandemic.
“We want to show that Bitcoin is going against the stock market. But unfortunately, they are all going in the same direction,” Paolo Ardoino, CTO of crypto exchange Bitfinex, said.
Due to the impact of the epidemic, Bitcoin lost 50% of its value by March 2020, even worse than the stock market. Retail investors rushed to sell off and withdraw money despite calls to calm down “hold” from Bitcoin’s most loyal followers.
Next to the Dow Jones and the S&P 500, Bitcoin’s fundamental and infrastructure philosophy is being tested. At one point, the overcrowded trading volume caused some cryptocurrency exchanges to crash. On OKEx, the transaction waiting time sometimes triples, the fees attached are also continuously increasing.
“We can’t take a nap. It feels really bad, everyone is in shock. Even if it’s not the end of the world, we don’t know when the Bitcoin price will recover,” Lai said.
Will Bitcoin turn into gold thanks to Tesla?
The turning point for Bitcoin to recover in value and growth was in May 2020, billionaire hedge fund manager Paul Tudor Jones announced that he had converted 2% of his assets into Bitcoin and informed investors that The Tudor BVI Fund will put Bitcoin in the transaction of settlement contracts in the future, and see this as a measure against inflation.
From then on, Bitcoin started to gain momentum thanks to the attention of large institutions such as investment banks, hedge funds or companies like Tesla.
“We have always believed that Bitcoin will be used as a digital gold. And that is evidenced by a well-established and accomplished entrepreneur like Jones. For someone with a background in banking. investment, the creation of a new asset class is very interesting “, Richard Galvin, CEO of Digital Asset Capital Management, shares.
In order to realize the dream of turning Bitcoin into gold, it must demonstrate the basic values, including consistency and price stability, and sufficient liquidity for investors to participate. Along with that, the entry of major monetary organizations will help support, helping digital assets like Bitcoin be trusted and become gold.
Now, investment banks, hedge funds and high-volume companies are focusing on using cryptocurrencies as a sustainable, mainstream mode of exchange, investing in crypto Units sourced from digital assets and required compliance with laws.
“Banks have been buying cryptocurrencies for a long time. They don’t make it official, but that doesn’t mean they don’t care. Gold is no longer an asset worth accumulating.” Lai said.
However, new cash flows are creating legal loopholes. This is why regulators are concerned with Bitcoin or digital currencies in general, especially security when dealing with large-scale thefts and hacks in the market.
Analysts have repeatedly warned about the risk of failure in the process of understanding customers and investigating anti-money laundering of exchanges, thereby receiving a wave of pouring capital from new investors. OKEx exchange says it has to process more than 10,000 KYC (investor identity verification) requests per day. In addition, some jurisdictions have not yet formed rules on custody, derivative instruments and taxes.
Analysts at RBC Capital Market hinted in a research note last week that Apple could be the next company to invest in Bitcoin and even build a crypto exchange based on Apple Wallet. . Apple has not said yet whether or not their future plans will enter the crypto market.
Not only that, the move of payment gateways Visa, PayPal, Mastercard or Square allowing the use and transaction of Bitcoin has created new opportunities for cryptocurrencies to be formalized. With that, Tesla’s bid will help speed this process up.
“Bitcoin and blockchain technology (blockchain) will continue to grow. This is a major step forward for the global cryptocurrency industry in the next two years.”, Galvin said. When Bitcoin’s value exceeds $ 50,000 in the near future, investors who don’t pay attention to it will start to fear seeing the value of a new asset increase.
“Please keep the spirit and should use capital carefully to invest properly. Understanding the philosophy of financial operations is more important than trying to make money”, CEO Ardoino said.
Ngoc Diep (According to Nikkei Asia)