Bitcoin Volatility Is an Issue for Large Companies, Says JPMorgan
Bitcoin volatility is one of the biggest issues that is preventing large companies to add BTC into their balance sheets, according to a research note published by JPMorgan strategists led by Nikolaos Panigirtzoglou. Tesla, the world’s largest electric-car maker revealed in its latest filing that the company has invested nearly $1.5 billion in Bitcoin.
The research note mentioned that mainstream corporate treasurers are unlikely to follow Tesla’s example due to the volatile nature of the cryptocurrency. The report highlighted the growing Bitcoin inflows after the recent announcement by Tesla.
“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin. The addition of BTC would cause a big increase in the volatility of the overall portfolio of large companies. BTC allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualized volatility,” the research note states.
In addition to the $1.5 billion investment, Tesla mentioned that it is planning to consider Bitcoin as a payment method for its products. The price of the world’s largest cryptocurrency jumped more than 20% following the announcement by Tesla.
Volatile Nature of Bitcoin
Bitcoin’s volatility has increased significantly since the start of 2020 due to a rapid jump in adoption and involvement of institutional investors. According to the recent weekly crypto inflows report by CoinShares, the trading volume of BTC has jumped substantially since the start of 2021. Finance Magnates earlier reported about the supply crisis BTC is going through these days. Furthermore, anonymous BTC transactions are on the rise as BTC whales are moving funds from digital exchanges to crypto wallets in an effort to create a supply shortage. Bloqport, the crypto analytics and research platform mentioned today that the Bitcoin withdrawals from crypto exchanges reached the highest level in 3 years. All these factors are playing an important role in Bitcoin’s volatility.
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