Bitcoin’s Downside (?)

So Bitcoin price traded at over $50k today, surpassing $1 trillion market cap.

People are seeing the future where Bitcoin are welcomed or adopted in certain ways by major institutions.

– Tesla bought $1.5 billion Bitcoin recently.

– Twitter considers “how we might pay employees should they ask to be paid in bitcoin, how we might pay a vendor if they asked to be paid in bitcoin and whether we need to have bitcoin on our balance sheet

– Banks like BNY Mellon are going to offer Bitcoin-based service.

While I share a similar view that it is becoming more mainstream, I think it also faces risks – people should remember that it’s not rare that governments “hated” gold occasionally in the past.

“One of his first moves as President was to declare a four-day bank holiday and suspend gold exports. Within days, the Emergency Banking Act was enforced that prohibited banks to pay out gold coins or bullion or gold certificates except under a government-issued license.

Just two weeks prior to abandoning the gold standard, he issued an executive order prohibiting hoarding of gold coins, bullion or gold certificates.” – Investopidia “When FDR Abandoned the Gold Standard”

As people talk about how Bitcoin can replace gold, the risk transfers to Bitcoin as well.

Fed’ or others’ ability to effectively print money will be reduced if goods and services are priced in Bitcoin and wages are paid in Bitcoin.

Tesla Bought $1.5 Billion Bitcoin

On Monday, Feb 8, Tesla announced it bough $1.5 billion bitcoin and would accept it as a payment method soon.

A few takeaways:

1/ There will be more companies using bitcoin to manage their cash, adding to the demand for it.

2/ Bitcoin as a payment method will be more mainstream. Now people not only can rely on selling it to the market, but maybe can buy a Model Y. The future question would be – what will the “economy” look like on Mars? I bet Bitcoin will be important.

Questions remain –

How Tesla is gonna price its cars? in fixed Bitcoin? that will cause a collision with USD, etc. as Bitcoin is volatile on a daily basis.