Blood Pressure
Bitcoin’s price volatility isn’t its only risk. The coins are vulnerable to hackers, fraud and forgotten passwords, though institutional investors use custodial services to reduce those dangers. And the incoming administration of President-elect Joe Biden could mean more scrutiny and tighter regulations.
And certain industries, such as financials and utilities have disclosure requirements or covenants that could make it even more difficult to add Bitcoin to their balance sheets, according to Howard Silverblatt, senior index analyst at S&P Dow Jones.
“On a bank, can you imagine a bank — we’re not talking about an investment in a company but just holding the Bitcoin itself — how they’d have to show the risk back to the Fed? How do they do that?” he said. “Can you imagine Jamie Dimon’s blood pressure?”
Still, there are plenty of Bitcoin bulls. Scott Minerd of Guggenheim Investments recently said it could grow to be worth $400,000. JPMorgan Chase & Co. said Bitcoin has the long-term potential of reaching $146,000. Projections like these only add to fears of missing out on the boom.
“Is it a smart strategy? It could be,” Willens said about CFOs investing reserves in cryptocurrencies. “But, of course, if it’s not, it would become something that could threaten the very existence of a corporation.”
-With assistance from Vildana Hajric and Tom Contiliano.
This article was provided by Bloomberg News.