Big companies unlikely to follow Tesla on Bitcoin: JP Morgan


Tesla’s $1.5 billion investment in bitcoin probably won’t inspire other major companies to spend their corporate cash on cryptocurrency, JP Morgan analysts say.

The electric-car maker’s move to spend 8 percent of its cash reserves on bitcoin spurred speculation that the digital currency might start appearing on more balance sheets.

But Tesla’s example is “unlikely to be followed by more mainstream corporates” because bitcoin would make their staid corporate treasuries much more volatile, according to a team of JP Morgan analysts led by Nikolaos Panigirtzoglou.

Corporate treasury portfolios — typically composed of bank deposits, short-dated bonds and money market funds — usually have an annualized volatility of about 1 percent, the megabank’s analysts said in a Tuesday research note.

Moving even 1 percent of such a portfolio into bitcoin could cause that rate to multiply eightfold because of the cryptocurrency’s wild price swings, which can give it an annualized volatility of 80 percent, according to the analysts.

The JP Morgan team conceded that Tesla’s Monday announcement “changed abruptly the near-term trajectory for Bitcoin by bolstering speculative institutional flows via Bitcoin futures as well as retail flows.”

BItcoin’s price touched an all-time high above $48,000 on Tuesday and traded at $44,655.05 as of 12:24 p.m. Wednesday, nearly triple where it was three months ago.

“How sustained this week’s price surge becomes would depend in our opinion on whether less speculative institutional flows … follow suit,” the JP Morgan note said.

Other big companies have had mixed reactions to Tesla’s bitcoin buy.

Twitter finance chief Ned Segal said the social network is considering adding the crypto asset to its balance sheet. But General Motors CEO Mary Barra told analysts Wednesday that the automaker has no plans to invest in bitcoin, according to CNBC.

Tesla shares were down about 4.7 percent at $809.41 as of 12:24 p.m. Wednesday.