Musk assures that Tesla’s purchase of bitcoins “does not directly reflect his opinion.”
Apart from these statements, banks like JP Morgan reject deposits for excess dollars.
Large banks, such as JP Morgan, are asking their clients to transfer their cash to other financial institutions. This is reported by the BBC news outlet, describing this new situation as an “inverse” liquidity crisis. While this is happening in American banks, Elon Musk, CEO of Tesla and one of the richest men of our time, claims that bitcoin (BTC) has become an alternative to cash for large companies.
Musk’s remarks originated from a recent interview with Changpeng Zhao, director of the Binance exchange, who commented on Elon Musk’s enthusiasm for the cryptocurrency Dogecoin (DOGE) and the recent acquisition of bitcoin by the Tesla company. Zhao suggested that although the millionaire tends to show more support for (DOGE) on social media, in real life he decided to make a serious bet it was in bitcoin and not in another asset.
The Tesla CEO responded by Twitter to Changpeng Zhao’s comments, clarifying that Tesla’s action did not directly reflect his opinion about the cryptocurrency market. And, although the car company has invested $ 1.5 billion in BTC, Elon describes Bitcoin as “almost as shit as fiat money.” However, it is in the “almost” where he notices the difference so that bitcoin has become an alternative option to cash.
“When fiat currency has negative real interest, only a fool would not look elsewhere,” Musk clarified in a tweet. In his view, Bitcoin “is a less silly form of liquidity than cash”, so it makes sense that one of the best-priced companies in the world has decided to put its expectations on this digital asset.
Elon Musk clarified that he is not an investor and does not own publicly traded stocks, other than Tesla. However, it considers that Tesla’s recent purchase of bitcoins is an “adventurous” move in an economic landscape full of uncertainty. And it is that, while Musk considers that the cash is having a depreciation, the banks support this vision by rejecting new deposits due to excess cash. A reaction that for many is unusual and has no precedent in the financial world.
In the absence of banks that accept cash, use bitcoin
Data from JP Morgan, Bank of America and City Group indicate that in 2020 alone they received more than a billion dollars in deposits. Likewise also reached an all-time low in the amount of loans granted, this being one of the main business modalities of banks.
In this sense, the expert on the US financial system, Nathan Stovall, affirms that we are experiencing “a reverse liquidity crisis”. In other words, there are excess deposits in banks and users are accumulating dollars in their accounts; a phenomenon that had not occurred before in other financial crises. Stovall believes that this is happening because of the remnants of the 2008 economic crisis, the pandemic, and the new US dollar issuance policies; events that have had an impact on the economy and have been reported by CriptoNoticias.
The academic assures that, under normal conditions, banks are eager to receive income. This is because they use that cash to make loans and earn interest. However, at present the profit margin that banks can receive has decreased. Financial institutions are now flooded with money due to stimuli from the United States government, which has granted bonds to companies and individuals, along with increased dollars in circulation.
Banks reject deposits and firms such as JP Morgan are implementing measures for clients to reduce the amount of money deposited in their vaults. Source: Mint_Images / elements.envato.com
In the same way, the demand for credit has plummeted, which is why now the big banks are not so interested in receiving money and reject deposits. It is unprofitable, and even costly, for banks to handle large amounts of money. Because of this, firms like JP Morgan are applying measures so that their biggest clients reduce the amount of money deposited in their vaults, imposing a maximum deposit of 200,000 million dollars per user. Stovall explains:
“Usually when there is a recession, cash becomes a precious commodity and banks can be very aggressive in raising funds. But in the crisis caused by the pandemic, the opposite occurs. Banks have too much money from which they can barely make a profit. “
Nathan Stovall, an analyst at S&P Global Market Intelligence.
Despite this new reality, Nathan Stovall believes that there will always be some institution that is willing to receive funds, but that, possibly, the large firms are no longer so interested. In the midst of this new conjuncture, Elon Musk’s words take on a new dimension, since cash is becoming less and less valuable in the eyes of big business.
While this is happening, the price of bitcoin continues to rise and has reached its highest number of 57 thousand dollars per unit. The increase in value of bitcoin in recent months is an indication that the cryptocurrency has become increasingly precious in the financial market, and that its use and interest has not waned. Because of this, it makes sense to think that bitcoin is ultimately becoming a smart and tempting alternative to cash.