Elon Musk holds to power to set the internet abuzz with a tweet. This guy is a South African-born entrepreneur who is the owner of Tesla Motors and many such multi-nationals. But this isn’t it, he happens to be one of the most relevant people in the Bitcoin world. His tweets regarding the matter always manage to keep him under the limelight.
What makes so many people look up to his tweets is that his company Tesla alone has done an investment of US$ 1.5 billion in the Bitcoin business. Although the amount of Bitcoins held by Musk in totality have never been released formally, people like Anthony Scaramucci think he owns Bitcoins worth more than US$ 5 billion. He is the founder of the global hedge fund SkyBridge Capital and the former White House Communications Director, this is why his statements are not taken easily.
Just recently, on the 24th of March, he took his Twitter yet again, to announce that his company Tesla will be accepting bitcoin as a payment method to buy all models of cars. He also said that this is an America-only offer as of now but he plans on letting other countries join soon. This ‘unusual’ news opened up many questions such as will other companies follow the footsteps of Musk and Tesla? Well, a definite answer to this will come with time but we will try looking into the general market situation to see if we can predict what’s next.
Bitcoin popularity was already showing unprecedented growth clearly. Data from Semrush said that since the start of the year 2021, crypto-related searches on google met an increase of more than 1015%. With the graphs soaring high already, came this decision from Tesla Motors. As a consequence, the price of digital currency skyrocketed by 4.7% around 4 20 a.m. ET.
According to transactional experts, this decision can be a game-changer for bitcoin but some crypto experts call it an ‘unstable’ choice. They think that many factors will keep the rest of the companies from making a similar move.
Richmond Super broker Tom Korbel explains exactly why this measure is expected to be unpopular in the entrepreneurial world.
You Call It Currency, They Call It Property
Cryptocurrencies are facing tax issues in many countries all around the globe. Particularly after the stance of the International Revenue Service (IRS), that it considers bitcoin to be a property and not a current has significantly changed the previous scenario to a large extent. This is in fact an added complication for the traders who are being taxed according to the US tax rules and regulations.
Korbel explains how currency and property exchange are two different things. When a currency is exchanged for the currency you are not supposed to pay tax on it. But if you’re doing property for property exchange then the transaction is considered taxable. Companies accepting bitcoin will be acquiring these digital tokens daily which will literally mean a nightmare to them.
Transaction Fee Fuss
It doesn’t end here, new currency means new problems. When transactions are made through the crypto networks, in order to ensure that the transaction was processed and confirmed by a miner, money is charged in the name of “mining fee” or “network fee”. Irrespective of the amount of the asset you’re transacting, you have to pay a standard fee every time a transaction is done.
Coming towards the amount, it can vary depending on factors such as network congestion. Currently, the average mining fee is around US$20 but can spike if there is a large traffic demand. Once in 2017, when the crypto boom was all over, it reached US$ 60. Imagine paying $60 for all the transactions you do in a day. Highly uneconomical.
Bitcoin has in no time earned itself the badge of digital globe store and reserve asset. But the frequent fluctuations don’t let it reach heights it could. Although the current market cap of bitcoin surpasses $1 trillion, many experts find it not only a costly payment method but also “impractical”. A sudden and unpredictable fluctuation can discourage customers from paying in bitcoin. Companies who invest billions of dollars into their business are not ready to take the risks that come with such volatile currencies.
There are a number of other such factors which mark the currency unfit for use such as harsh stances of counties against the digital token. Apart from this, there are only a bunch of banks all around the globe that are somehow willing to provide the stored digital facilities which means that the digital wallet regulation remains unsorted largely. Other concerns such as bitcoin mining being non-eco-friendly contributes to the reluctance of investors in a way or the other.
Richmond Super broker Tom Korbel observes that Mr. Musk’s measure is more of an “experiment” and only if it bores him fruitful results, he himself will stick to it. Currently, it seems like an inappropriate option for many experts and investors.
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