On July 2, 2020, Tesla TSLA shares soared after it reported that 90,650 vehicles were delivered in the second quarter, surpassing Wall Street expectations. Elon Musk appears to be undefeated by current economic conditions, unlike his competitors.
And while most reports focused on Tesla becoming the most valuable auto-maker and surpassing Toyota, there is another comparison that is worth being made.
On July 2nd, Tesla’s shares closed at $1,208.66 with a total market capitalization of a whopping $224.1B. Bitcoin, trading at $9,136.15, is currently at a market cap of $168.3B, down from an all time high of $334B.
In fact, there are several publicly traded companies whose sizes eclipse that of Bitcoin and the entire crypto market, including Microsoft MSFT, Apple AAPL, Alphabet, Amazon AMZN, Facebook and Berkshire Hathaway BRK.B.
Governments globally are keeping their eye on Bitcoin, which has acted as a hedge against unstable currencies. Bitcoin has gained particular prominence in Venezuela, Lebanon and Zimbabwe, all of which have experienced hyperinflation. The Russian government has also shown interest in Bitcoin, reportedly investing in Bitcoin-mining facilities in the north, while banning use for regular citizens.
Proponents of Bitcoin argue that it will replace money for the next generation. And this may well be true. But with the Federal Reserve issuing over $4 trillion in stimulus so far, and most recently initiating a $750 billion corporate bond buying program, Bitcoin seems like small potatoes to the American government. Even more concerning is that, given its current spending patterns, the Federal Reserve could simply buy up all available Bitcoin supply and eliminate any competition to the USD as the world reserve currency.
There are two potential futures for Bitcoin. The first is a small group of wealthy individuals (or governments) accumulate the majority of this digital asset, and decrease its significance. This is far-fetched, but possible, given some of the wealthiest individuals in the world, including Jeff Bezos, hold more wealth than the market cap of Bitcoin.
The second is governments go on a buying spree of Bitcoin, using it as a type of commodity to back its currency, similar to the gold standard. It is estimated that 45% of the world’s current gold supply is currently held in government vaults, with regular purchases made each year. A similar treatment of Bitcoin could drive up the price of Bitcoin to never-before seen levels, creating a new “Bitcoin Standard.”