When Tesla CEO Elon Musk gave his endorsement to bitcoin, the cryptocurrency's value skyrocketed — and in doing so, demonstrated just why merchants and banks are still afraid to touch it.
Tesla recently
Bitcoin's volatility remains a sticking point for payments. Despite soaring in 2020 and hitting a recent record of nearly $47,000 as of Tuesday afternoon, bitcoin still fell below $30,000 for a time in January. And for all his fame, Musk's support doesn't build a merchant network by itself.
Tesla "just adds one e-commerce site," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group, adding PayPal could influence merchants and consumers more than Tesla (Elon Musk was a co-founder of PayPal).
"If and when PayPal enables all of its merchants to accept bitcoin, that will have a much larger impact than Tesla because PayPal will greatly expand bitcoin acceptance at all of its e-commerce and POS accepting locations," Sloane said.
That's a more direct tie between consumers and merchants than the U.S. card brands. Mastercard's cryptocurrency strategy has led to a partnership with
While a universal use case for bitcoin payments has yet to emerge, attention to crypto payments has created options that are close to central banks, such as
Tesla's move has sparked speculation that other large firms will follow suit. RBC, for example, suggested Apple could tie bitcoin buying and selling to its digital wallet and payment app, according to
The automaker did not return a request for comment by press time, and its SEC filing did not say when it would begin accepting bitcoin payments. Tesla joins a parade of high-profile investors and supporters of bitcoin and other crypto, such as
Tesla's support is more consistent with early uses of crypto for payments for high-profile items like
"I’m hearing from different players in the space that one of the primary use cases for bitcoin right now is luxury items because bitcoin has created so many overnight millionaires who need some place to spend their coin," said Talie Baker, a senior analyst at Aite Group, adding the price volatility of bitcoin still works against it being used for direct payments. "I think it does make people more aware of bitcoin overall, as does PayPal and Square's crypto product offerings."
Beyond all of the buzz from the bull market of the past year, bitcoin's usage as an actual form of currency is rare. About 15,000 businesses globally accept bitcoin, with about 2,300 in the U.S. taking direct bitcoin payments, according to
The attention from Tesla's high-profile investment creates a halo effect, Donald Kasdon, founder of T1 Payments, argues in a forthcoming PayThink column.
"There is a lot of room for growth here as cryptocurrencies go mainstream and a few major brands recently started accepting bitcoin," said Kasdon, adding accepting bitcoin and other cryptocurrencies can increase customer range and cut down on processing fees from mainstream payment processors. "I expect we’ll see increased adoption and acceptance of bitcoin by large corporations over the next five years as more retailers and e-commerce merchants jump on the bandwagon," Kasdon said.
Tesla's announcement does help legitimize bitcoin as a currency, while the investment confirms the automaker's trust and belief in bitcoin as a valuable asset, says Daniel Polotsky, CEO of CoinFlip, a crypto ATM provider.
But since many people view bitcoin as a hedge against inflation and prefer to hold coins, it would be advantageous for Tesla and other companies to accept additional currencies that would make for better transacting, according to Polotsky.
