Tesla’s Bet on Bitcoin Hasn’t Convinced Wall Street to Jump In, Yet

Tesla’s revelation of its US$1.5 billion bet on Bitcoin this week sent the cryptocurrency soaring to a fresh all-time-high, but if news of another listed U.S. firm putting a portion of its cash reserves in Bitcoin would send Wall Street flooding in, the response has been notably tepid.

To be sure, Tesla is a cutting-edge electric vehicle maker, pushing the envelope in mobility solutions, so why wouldn’t it also seek to reshape what constitutes currency as well?

Banks being legacy institutions would naturally be more hesitant to push the envelope on the nascent digital asset class with most top U.S. banks still shying away from cryptocurrencies.

While futures contracts tied to Bitcoin and Ether are available at major exchanges, none of the six biggest American banks offer their customers access to such trading – they’ll need to get their crypto fix elsewhere.

To be fair, the 2008 bailout of banks was provided as the primary driver for Bitcoin’s creation, so it should come as no surprise that they were excluded from the crypto party.

Writing in the 2008 Bitcoin whitepaper, Satoshi Nakamoto, a pseudonym for the person or people who developed Bitcoin wrote,

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

And while firms such as Tesla may be big on Bitcoin, banks may be slower to embrace an asset class that is essentially looking to disrupt their very business model.

Amongst the biggest banks in the U.S., JPMorgan Chase (-0.40%) has been the most forward-looking when it’s come to cryptocurrencies.

Despite its CEO Jamie Dimon famously calling Bitcoin a “fraud,” last year, JPMorgan Chase agreed to onboard cryptocurrency exchanges Coinbase and Gemini Trust as banking clients, breaking with an industry that has routinely denied even the most basic banking services to cryptocurrency firms.

Dimon later retracted the criticism of Bitcoin and says he regretted those comments, seeing Bitcoin as a way for the bank to use blockchain technology, including speeding up corporate payments through its own JPM Coin, built on the same technology that powers Bitcoin.

As recently as last May, Goldman Sachs (+0.10%) derided the idea of Bitcoin as an asset class, pointing to its wild swings and arguing that it was not a real unit of value.

Yet behind the scenes, Goldman Sachs had been exploring the creation of its own fiat-based cryptocurrency and hired a cryptocurrency trader to help lead digital asset markets, while mulling over starting a digital asset trading desk.

But in a low-yield environment, with near-zero interest rates, Wall Street, while mostly on the sidelines for now, may fall in when cryptocurrencies become too good to ignore.

Tesla’s US$1.5 billion bet on Bitcoin could be worth a notional US$5.5 billion next year based on historical returns.