By Bence Takács
Dubbed as a fairer financial system and an alternative to government fiat currency; bitcoin has been reaching new heights, as corporations are starting to embrace the technology as part of their investment portfolio. The frenzy over bitcoin and other cryptocurrencies had always been sparked by surges in individual investing rather than corporate strategy-driven behavior. However, since early 2021 bitcoin has been soaring to new records, partly because of billionaire Elon Musk’s Twitter announcement.
This was not the first time the eccentric billionaire created such headlines with his unusual ways of directing the company. Back in 2018, Musk was charged with security fraud by the SEC (the stock market regulating body in the United States) due to his ‘promotion’ of stocks on Twitter. This was demonstrated by one of his tweets claiming that ‘funding is secured to take Tesla private at $420 a share. Legal experts were arguing that, a high-profile executive with 25 million followers has a tremendous influence, and that his influence should not be misused to drive up stock prices. As a matter of fact, following his tweet, the stock prices saw a 13% increase. Eventually, the case against Musk was settled but has not altered his controversial use of social media. Fast forward to February 2021, Musk said bitcoin prices ‘seem high’ in a tweet replying to Peter Schiff, a vocal critic of bitcoin and the arch-enemy of the cryptocurrency community. The initial trigger of bitcoin’s record-setting rise dates back to February when an SEC filing had revealed that Tesla has invested 1.5 billion dollars in bitcoins.
Some cryptocurrency skeptics – like Nouriel Roubini, economics professor of NYU – argue that bitcoin is essentially a self-serving system with no intrinsic value or purpose. In fact, Roubini goes further and claims that cryptocurrencies are not even considered money and that their only purpose is to serve speculators. In order for something to be perceived as money it has to be scarce, divisible, portable, durable, and has to have the ability to store value. With the exception of storing value, these requirements are more or less fulfilled by bitcoin.
In the meantime, both Visa and Mastercard have announced intentions of rigorous support for bitcoin. There is a high chance that people will be able to use a credit card denominated in bitcoin later this year. This might very well be another indicator for firms to jump on board.