By Yasin Ebrahim
Investing.com – Bitcoin surged to a record high Monday, riding the announcement of Tesla (NASDAQ:TSLA)'s $1.5 billion investment in the popular cryptocurrency to maximize returns on its cash -- a move that experts say will emerge as a trend among other companies sooner than many expect.
Bitcoin rose 13.5% to $43,215.
Tesla disclosed in a securities filing that it had invested $1.5 billion in bitcoin and added that it expected "to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis."
The move comes just a week after Michael Saylor, CEO of MicroStrategy, stressed the importance of companies recapitalizing their treasuries with assets like bitcoin that is "going to appreciate faster than the rate of monetary supply expansion" amid an ongoing debasement in fiat currencies.
Still, experts say that while bitcoin's market cap of about $850 billion remains a relatively small asset class, the move by Tesla to diversify its reserves, would likely lead to others following suit sooner than many expect.
"The most credible objection for corporates, or any other institution considering adopting BTC as an asset class is that it remains--at roughly $800 billion--a relatively small asset class," said Seamus Donoghue, VP Sales and Business Development at Metaco.
"However, as the asset class grows, and it has grown 14% on the Tesla announcement alone, the liquidity concerns diminish making it eligible as an investment to a broader investor base. Such a virtuous liquidity cycle will draw in considerably more allocations as it grows," he added.
The sense of urgency for companies to explore alternative investment destinations for their treasury assets has been exacerbated by a lack of return from traditional assets including bonds and dividends relative to "new financial assets," Antony Welfare, Executive Director, Enterprise at NEM Software said.