Cryptocurrencies sank en masse on Wednesday evening Beijing Time. Bitcoin once lost the $45,000 mark, extending its intra-day losses to more than 2%, and has now narrowed its losses. Ether fell back below $1,700 per coin, down 4.14% intra-day, and Ripple fell more than 5% intra-day.
Some analysts point out that while tesla‘s lead entry has boosted the bitcoin market, a host of Wall Street giants are still not taking further action at the moment. The cold shoulder of the giants may throw a pot of cold water on the frenzied bitcoin bulls.
Among them, Goldman Sachs has downplayed the idea of bitcoin as an asset class, saying its dramatic price swings prove it’s not a true unit of value. Wells Fargo spokesman Roger Cabrera also said the bank would not accept cryptocurrency assets in its deposits, custody or other accounts.
JPMorgan, for its part, said it can’t expect other big companies to follow suit and add bitcoin to their balance sheets, like Tesla.
Strategist Nikolaos Panigirtzoglou and others wrote in the report that the main problem with the idea of mainstream corporate treasury following Tesla’s lead is bitcoin’s volatility. Adding 1% of bitcoin to a portfolio allocation would result in a significant increase in overall portfolio volatility. In addition, due to Bitcoin’s 80% annualized volatility, the portfolio’s volatility would have to rise to 8% in this allocation.
It should be noted that Tesla’s filing also points out that the use of bitcoin could pose a risk to the company’s financial position, as cryptocurrencies have been risky in the past and could continue to be “highly volatile.
In addition, some analysts believe that the price of bitcoin has risen nearly 67% since January 1 of this year, and that even a modest pullback is now completely understandable.
It is worth noting that investments in bitcoin will also face regulatory resistance.
Tesla said in its annual report that the bitcoin investment has been approved by the company’s board of directors, but that it expects bitcoin payments to be “subject to applicable laws” in the near future.
Undoubtedly, accepting bitcoin as a payment method is expected to attract more regulatory scrutiny, as governments tend to be wary of cryptocurrencies being used for money laundering or tax evasion.
Reports indicate that Tesla may be under scrutiny by the Financial Crimes Enforcement Network, an agency under the U.S. Treasury Department that regulates cryptocurrency exchanges, and that electric car makers like Tesla may also be required to report suspicious transactions to regulators.
Tesla isn’t the first company to accept bitcoin as a payment method. Tech giant Dell, furniture company Overstock and travel site Expedia started accepting bitcoin a few years ago. But the future of bitcoin remains fraught, considering that a host of Wall Street giants are holding back.
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