The year 2021 never ceases to surprise, and the pace of events is as fast as in a good action movie. What is more, there are new themes, which makes the whole financial spectacle even more attractive. Cryptocurrencies, which are becoming more and more attractive for American companies listed on the stock exchange, also add their own thread.
The world seems to be changing before our eyes, and the pace of these changes is very fast. We are talking, first of all, about questioning the U.S. dollar or U.S. Treasury bonds as basic assets to hold on the balance sheets of companies or even local governments. We're talking about the possibility of starting a new trend that may be based on contract, because so far it's not based on value in use, which is buying cryptocurrencies as a diversification of balance sheets. This is what Tesla has done, announcing that it is following in the footsteps of companies like MicroStrategy and Square by buying BTC for $1.5 billion. Tesla is said to have about 20 billion in free funds that the company doesn't need at the moment, and it decided to use 7.5 percent of those funds to buy the most popular cryptocurrency.
This, of course, caused euphoria in the market, where the BTC/USD exchange rate rose to over $48,000 per bitcoin this morning. According to market observers, the decision of Tesla's management may open the way for other companies, which in a moment may receive the question from their shareholders: why don't we allocate a few percent of our funds to the purchase of BTC? The question seems legitimate at a time when inflation expectations in the US are on the rise, and the money supply is growing at a pace never seen before.
It is worth remembering that when tens or hundreds of billions of dollars are at stake, every one percent loss, due to negative real interest rates, represents a significant loss of funds for these companies. It may soon turn out that bitcoin is desirable as a reserve asset, not only for Wall Street investors, companies listed on the U.S. stock exchange, but also for the local governments of American cities. The mayor of Miami, Florida, who is a cryptocurrency proponent, is expected to be the first to apply for it. Miami could soon be the first city in the world to float part of its budget in bitcoin. The decision could come as early as this week.
So we are witnessing a change that may be recorded in the pages of history and we could be a part of it.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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